Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER: in the Chair]

Death of a Member

Mr. Speaker: I regret to have to inform the House of the death of the right hon. Sir Rodney Graham Page, MBE, Member for Crosby, and I desire, on behalf of the House, to express our sense of the loss we have sustained and our sympathy with the relatives of the right hon. Member.

Writ Issued During the Adjournment

Mr. Speaker: Acquainted the House that he had issued during the Adjournment, a warrant for a new Writ for Croydon, North-West, in the room of Robert George Taylor, esquire, deceased.

Gas and Oil Industries (Disposal of Assets)

The following Question stood upon the Order Paper:

Mr. Peter Viggers (Gosport): To ask the Secretary of State for Energy if he will make a statement on the divestment of certain assets of the British Gas Corporation.

The Secretary of State for Energy (Mr. Nigel Lawson): The House will be aware that I issued a direction last week under section 7 of the Gas Act instructing the British Gas Corporation to dispose of its stake in the Wytch Farm onshore oilfield. This needs to be seen in the context of the Government's overall plans for privatisation and competition in the oil and gas industries.
First, the Government propose to introduce legislation to allow the transfer—I would hope next year—of the entire oil-producing business of the British National Oil Corporation to the private sector, with the State retaining only a minority stake.
Secondly, the Government will also be seeking powers to privatise the British Gas Corporation's substantial offshore oil business. These powers will also enable the Gas Corporation to be required to dispose of its showrooms. As we have made clear, it is essential that safety standards are fully maintained. This will require complex safety legislation for which there is unlikely to be time during the coming Session of Parliament. However, the Government remain fully committed to breaking this monopoly as soon as practicable.
Thirdly, the Government also intend to introduce measures to abolish the Gas Corporation's unique statutory rights over both the purchase of gas and its sale to industry in particular. These outdated privileges have acted as a serious disincentive to the exploration and development of gas supplies on the United Kingdom continental shelf with the result that British industry has not had all the gas it needs. The measures to be introduced, which will include effective private access to the Gas Corporation's pipeline system, will for the first time introduce real competition into the market for gas.

Mr. Viggers: Does my right hon. Friend accept that his proposals will be enthusiastically supported on the Conservative Benches and, indeed, in the country because in a high risk industry State monopoly and State investment are not in the best interests of the consumer? Can my right hon. Friend be more specific about the sums of money involved and the timing?

Mr. Lawson: Substantial sums of money are involved. Indeed, I believe that it is no exaggeration to say that the measures that I have outlined add up to the biggest programme of privatisation to come before Parliament. In addition, the measures will introduce much-needed and long-overdue competition where it matters most. I share my hon. Friend's view that the proposals will be good for British industry, for the successful development of our oil and gas industries and, above all, for the nation.

Dr. David Owen (Plymouth, Devonport): Is the right hon. Gentleman aware that his statement will be seen as pure party political dogma? Does his decision to allow the BNOC to have a minority stake mean that he is prepared to renegotiate all the participation agreements? If he has

to reopen the negotiations on the participation agreements how will he safeguard the 51 per cent. of oil previously agreed? Now that the BNOC is to be a minority shareholder, is he certain that that will not reopen the whole question of the United Kingdom continental shelf rights? Instead of taking comfort in safety regulations, would it not be preferable to recognise that the wrong decision was made about gas? Is the right hon. Gentleman aware that the proposal will be construed as the Government bending to industrial blackmail?

Mr. Lawson: The right hon. Gentleman clearly misunderstood what I said about the participation agreements. I believe that I stated clearly that the BNOC's oil-producing business—the upstream business—was to be privatised but that its trading operations were to remain 100 per cent. State-owned, so there will be no impact on the participation agreements. With regard to his question about gas, I am sorry to see that even though the right hon. Gentleman has switched parties he is still in favour of monopoly.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call two more hon. Members from either side of the House. This is a reply to a question, not a statement.

Sir Charles Fletcher-Cooke (Darwen): Will my right hon. Friend confirm that there is to be no interference with or reduction in the rights of landowners at Wytch farm and that their present and future interests are fully secured?

Mr. Lawson: There is no reason to assume that the rights of landowners will be affected in any way.

Mr. Merlyn Rees: Is the Secretary of State aware that this is no way to put to the House a fundamental change of policy and that there must be a procedure to enable us to find out what the Government are up to? Is the House aware that the Government are once again showing, as they do on all occasions, that they are anti-public enterprise, even when, on any criteria, such enterprises have proved successful in other parts of the world?
What legislation will be required? I hope that it will not be such as to give a Secretary of State powers to act without parliamentary approval, as appears to be suggested in the proposals.
Is the right hon. Gentleman really saying that a private company will increase the supply of gas and supply it at a cheaper rate than does the British Gas Corporation? Finally, will the right hon. Gentleman accept that we are at least grateful that he has announced the death of the proposal to sell gas showrooms?

Mr. Lawson: The right hon. Gentleman huffs and puffs in his customary way. There is every reason to suppose that under this freedom more gas will be developed and brought ashore which will be for the good of British industry. There is a shortage of gas. It is the only fuel of which there is a shortage. That shortage will be ended.
There will be ample opportunity to debate the details of the legislation. The Queen's Speech, which will contain the proposals, will be debated in the normal way. When the legislation comes forward it will be debated in detail in the House, as is right and proper. I felt that it was for


the convenience of, and as a courtesy to, the House that at the first available opportunity after the Summer Recess I should say what we intend to do.

Several Hon. Members: rose—

Mr. Speaker: Order. As the House knows, I do not usually count the Front Bench when I say that I shall call two further Members from either side. I usually call the Front Bench at the end. I shall therefore call two more hon. Members from one side and one from the other.

Mr. Tim Eggar: I congratulate my right hon. Friend on his bold and imaginative statement, which was long overdue. Will he confirm that on the whole, the British Gas Corporation's monopoly of distribution and purchase has done untold harm to the economy over a number of years? Will my right hon. Friend go further than his statement and confirm that he will bring in legislation to ensure that he can introduce private equity into the British Gas Corporation in its new state?

Mr. Lawson: I am grateful to my hon. Friend for his kind words. I believe that the monopoly has done harm to this country, particularly in recent years. That is why I propose the changes that I have outlined. However, I think that these proposals are substantial and go as far as we should go. It is not my intention to introduce legislation to have direct private equity participation in the public utility that is the British Gas Corporation.

Mr. David Penhaligon: Does the Secretary of State believe that the Wytch field would have been developed earlier, or at all, if the proposals that he has now made had been implemented a decade ago?

Mr. Lawson: The straight answer is that I do not know. I do, however, know that taking Britain's new-found North Sea oil industry as a whole, it was private enterprise that made it the success story that it is. It is private enterprise that is the key to its continued success.

Mr. Peter Hardy: Will the Secretary of State accept that what he has announced is such a sweeping betrayal of the national interest that we should debate the matter now rather than wait for some incidental interventions in the Queen's Speech debate next month?
With regard to showrooms, will the right hon. Gentleman say what action he is taking about those companies that imported appliances in anticipation of the divestment? These companies may have contributed to Conservative Party funds in anticipation of that divestment. Will he advise British Gas to tell importers to send the appliances back?

Mr. Lawson: The hon. Gentleman's crocodile tears in his last sentences are not intended, I believe, to be taken seriously. There will be ample opportunities for debate. It is uncharacteristic of the hon. Gentleman to be so impatient that he cannot wait for the Queen's Speech, which is not so far distant.

Robb Caledon Shipyard, Dundee

Mr. Gordon Wilson: I beg to ask leave to move the Adjournment of the House, under Standing

Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the closure of the Robb Caledon shipyard in Dundee.
Until recently the shipyard employed more than 1,000 people in Dundee, but in 1979 British Shipbuilders announced its intention to close the yard, so ending a history of major shipbuilding in the River Tay that stretched back over 100 years. As a result of a sustained fight by the work force the yard was kept in business and reinstated as being capable of building ships, although British Shipbuilders preferred other work or the closure of the yard.
Despite the paper promises that were made, but never honoured, by British Shipbuilders, the order book dried up. British Shipbuilders, by voluntary redundancy and a process of attrition, scaled down the work force to just over 250. On 18 September British Shipbuilders sought to close the yard, with compulsory redundancies, but met with resistance from 145 of the men affected, who occupied the yard. It also met resistance from the Confederation of Shipbuilding and Engineering Unions, which objected to the breach of an agreement, known as the Blackpool agreement, which sought to prevent compulsory redundancies from taking place within the shipbuilding industry.
British Shipbuilders is adamant and refuses to budge, despite the difficulties that its actions have caused to the industry and the provocation of industrial trouble. Seventy thousand shipbuilding workers have been involved in large-scale efforts to try to prevent redundancies.
This matter is specific. It relates to the future of the Robb Caledon shipyard and the damage that the actions of British Shipbuilders have caused to the already precarious economy of the city of Dundee. It is important not only because of the involvement of Dundee, but because of the danger to the shipbuilding industry. British Shipbuilders admits that losses are weakening the corporation and impairing job security.
British Shipbuilders has behaved in a discreditable manner. In its treatment of the Robb Caledon yard it has acted in a manner reminiscent of a Victorian coal and iron master. Serious allegations, including the allegation that British Shipbuilders has been a confidence trickster, have been made, and these should be investigated by the House.
The matter is urgent. Although industrial action has been called off, through the intervention of ACAS, the position remains grave for the 145 men leading the fight. I checked with the convenor of shop stewards, Mr. Bob Barty, this morning. He tells me that the men have not been consulted about a possible takeover and know little of what is happening. They look for an honourable settlement and the retention of their jobs. I hope, Mr. Speaker, that your will allow the debate to proceed, to give the House an opportunity to show its concern and also to investigate malpractices on the part of British Shipbuilders.

Mr. Speaker: The hon. Gentleman gave me notice before 12 noon midday that he would seek leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the closure of the Robb Caledon shipyard in Dundee".
I listened with care to the hon. Gentleman. He was in correspondence with me on the matter during the recess.


I have listened with deep concern to his arguments. As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the order but to give no reasons for my decision. I listened with care to the hon. Gentleman and I understand his concern. I have to rule, however, that his submission does not fall within the provisions of the Standing Order and therefore I cannot submit his application to the House.

Energy Policy

Mr. Merlyn Rees: I beg to ask leave to move the Adjournment of the House under Standing Order No. 9 for the purpose of discussing a specific and important matter that should have urgent consideration, namely, 
the announcement of a Government energy policy that is a betrayal of the national interest".
The principle of the Government's announcement is clear, although some of the details are not all that clear. Whether it is a matter concerning the policy of the British Gas Corporation or the sale in BNOC in a manner that is not happening in most parts of the world, the House should not have to wait for two or three weeks to discuss the issue. Hon. Members should have the chance to influence the Government before the Queen's Speech. If that is not a normal argument, I would only remark that the Government themselves have chosen to make the announcement today in advance of the Queen's Speech.
This is an important matter. There is grave danger of a national strike. I may draw one conclusion, but other hon. Members may draw different conclusions. It is therefore vital that there should be a debate immediately on this important matter.

Mr. Speaker: The right hon. Gentleman askes leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the announcement of a Government energy policy that is a betrayal of the national interest.
I listened carefully to the exchanges that took place this afternoon that led to this application being made. The House has instructed me to give no reasons when I reply to an application under Standing Order No. 9. I have given careful consideration to what the right hon. Gentleman has said. I understand the strength of his feelings. I must, however, rule that his submission does not fall within the provisions of the Standing Order and that I therefore cannot submit his application to the House.

Orders of the Day — Companies (No. 2) Bill [Lords]

As amended (in the Standing Committee), considered.

Ordered, that new clauses 1 and 38 be considered immediately before new clause 29—[Mr. Eyre.]

New Clause 1

REGULATION AND RECORD OF THE USE OF BUSINESS AND TRADING NAMES

(1) Any person who carries on any trade, business, profession or occupation, in this Act referred to as a business—

under any name other than his own;
under his own name with any addition therto which does not form part of his name;
under his own name at premises other than his principal private residence;
in partnership with any other person, persons, firm or company;
who has previously been registered or liable to register under the Registration of Business Names Act 1916 which is hereby repealed shall be registered under this Act.

(2) Registration under subsection (1) of this section shall, subject to the provisions of subsections (5) and (7) hereof be effected by paying the prescribed fee and filing the prescribed form containing the following information—

the full trading name of the business carried on;
the purpose and general nature of the business;
the principal place of the business, together with the addresses of all branches thereof;
the full names and addresses of the proprietors, partners or companies who are the owners of the registered name and if a limited liability company stating its name and registered office and incorporation number;
the date of commencement of the business;
particulars of any other business name under which the business is carried on.

(3) If after the prescribed form has been filed changes take place affecting the information registered under subsections (1) and (2) of this section the particulars of such changes shall be filed on the prescribed form.

(4) The prescribed form referred to in subsection (2) shall be filed for registration on a date not less than 14 days prior to the commencement of business.

(5) The prescribed for referred to in subsection (3) shall be filed for registration on a date within 14 days of such changes taking place.

(6) The Registrar shall be empowered to refuse to register any name which he considers undesirable but any person aggrieved thereby shall have the right, within two months of such refusal, to appeal to the Secretary of State.

(7) The registration of a business name shall be effective as from the date of commencement of business stated on the prescribed form.

(8) On the filing of the prescribed form there shall be paid such registration fee as may be prescribed under subsection (16) hereof upon the receipt of which or as soon thereafter as shall be practicable a licence shall be issued.

(9) A licence issued under subsection (8) hereof shall be for five years whereupon the licence will expire although a new licence for a further period of five years may be applied for on any date not earlier than two months prior to the expiration of the existing licence.

(10) A licence issued under subsection (8) hereof shall be exhibited at the principal place of business together with a copy thereof at any and each additional place of business.

(11) The Registrar shall keep an index of all firms and persons registered pursuant to the provisions of this Act.

(12) Any person may inspect the documents filed by the registrar on payment of such fees as may be prescribed pursuant


to subsection (16) for each inspection; and any person may require a certificate of the registration of any firm or person, or a copy of or extract from any registered statement to be certified by the registrar and there shall be paid for such certificate of registration, certified copy, or extract such fees as may be prescribed.

A certifcate of registration, or a copy of or extract from any statement registered under this Act, if duly certified to be a true copy or extract under the hand of the registrar shall, in all legal proceedings, civil or criminal, be received in evidence.

(13) Any person who carries on a business liable to registration under this Act shall on all business letters, statements, bills, invoices, trade catalogues, trade circulars, business cards and other business stationery on which the business name appears state in legible characters the full name or names (or initials in the case of christian names or forenames of all the persons liable to register as being the persons carrying on the said business together with the words "Registered Business Name—" followed by the number allocated to the said name by the Registrar.

(14) Any person who carries on a business liable to registration under this Act who fails to register or to register the particulars of any change and who carries on business without having so registered or who fails to display the said licence or to display his true name as required by subsection (13) of this section shall on summary conviction be liable to a fine not exceeding £500 and shall not be entitled to enforce by action or other legal proceeding any rights under or arising out of any contract made or entered into in relation to the said business.

(15) The Secretary of State shall have the power by regulations made by statutory instrument to make rules concerning any of the following matters—

the forms prescribed for use under this Act;
the duties to be performed by the Registrar and his officers under this Act;
generally the conduct and regulation of registration under this Act.

(16)

The Secretary of State shall have power by regulations made by statutory instrument to require the payment to the registrar of such fees as may be specified in le regulations in respect of—

the performance of such of the registrar's functions under this Act or under rules made under this Act as may be so specified (including the receipt by him of any statement, notice or other document which under this Act or those rules is required to be delivered, sent or forwarded to him);
the inspection of ducuments filed by him under this Act.
Regulations under this section requiring the payment of a fee or increasing a fee shall be laid before Parliament after being made and shall cease to have effect at the end of the period of 28 days beginning with the day on which the regulations were made (but without prejudice to anything previously done under the regulations or to the making of further regulations) unless before the end of that period the regulations are approved by resolution of each House of Parliament.

In reckoning the period of 28 days no account shall be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days.

Regulations, under this section, other than regulations to which paragraph (b) above applies, shall be subject to annulment in pursuance of a resolution of either House of Parliament.
it is hereby declared that the registar may charge a fee for any services provided by him otherwise than in pursuance of an obligation imposed on him by law.
any fees received by the registrar by virtue of this subsection shall be paid for by him into the Consolidated Fund.

(17) In this Act, except where the context otherwise requires,—

"Business" shall mean business, trade, profession or occupation;
the singular shall include the plural;

the male shall include the female;
"person" shall include both a natural person and an incorporated body;
"Registrar" shall mean the Registrar of Companies or such other person as the Secretary of State may determine shall be the Registrar for the purposes of this Act.'.—[Mr. John Smith.]

Brought up, and read the First Time.

Mr. John Smith: I beg to move, That the clause be read a Second time.

Mr. Speaker: With this we may take the following:
New clause 38—Retention of documents by the Registrar of Business Names.
New clause 29—Civil remedies for breach of section 29.

Mr. Smith: During our previous consideration of the Bill we discussed the principle involved in the abolition of the Register of Business Names and the practical effects that will flow from that. It was considered both in this House and in another place, where on one occasion the Government sustained a notable defeat when opinion from all sections of that House combined to argue the case for a Register of Business Names.
The new clauses try to reinstate an effective Register of Business Names and prevent the destruction of the records, which have been accumulated since 1916.
The Register of Business Names is a useful device whereby people who trade under a name other than their own register that name and therefore the true identity of people running businesses can be made available to other companies, to consumers, to journalists and to the public in general. In the Bill the Government propose to abolish the register completely, although wide consultation revealed that nearly everyone who uses the register found it useful and argued against its abolition.
The chambers of commerce were notable in their opposition to the abolition of the register. Since it is near the constituency of the Under-Secretary of State, I quote at random from the Birmingham chamber of commerce. It said that: 
The Government's inflexibility over the issue of the Business Names Registry in the face of substantial opposition from many quarters is particularly disturbing.
The chamber said that it was in favour of retaining the service and went on to say: 
Whilst appreciating the need to reduce Government revenue spending we strongly recommend that in order to retain the Register and to improve both its accuracy and comprehensiveness, the fees charged should be increased to the appropriate levels to ensure that its operation is self-supporting.
In evidence supplied by Shell UK Ltd, that company said that it was opposed to the proposal to abolish the Register of Business Names. It said: 
It is a very useful aid to obtain or verify the details of the owners of businesses which we require for the purposes of legal proceedings or credit control. The fact that some of the records may be out of date does not detract from this view.
It provides a valuable source of identifying business names presently being used when consideration is being given to establish a new business name. It assists for this purpose in identifying areas of possible conflict or 'passing off'.
It is suggested that consideration be given to increasing the registration and search fees to cover the costs of maintaining the register.
We see no reason why the users should not be asked to bear the full cost.
Nor do the Opposition. The register is operating at a loss, for the very good reason that the fees have not been changed since its institution in 1916. It costs £1 to register. 


Organisations which have presented evidence to the Government have suggested that the registration fee should be increased fivefold, to £5, and that the search fee should be increased to £1.
When we debated the matter previously, the then Under-Secretary of State for Trade admitted that if fees were so increased the service would pay for itself. So, there is no difficulty in meeting the shortfall in revenue. The Government could immediately increase the fees and perhaps make a surplus on the operation of the service. There cannot be an argument on the grounds of cutting public expenditure.
I understand that about 65 civil servants are likely to be dispensed with if the register is abolished. That is not a large number, although it may be the real reason why the Bill is being pushed through. I believe that the Department of Trade was asked to produce some sacrifices so that the Government could claim that they were reducing the number of civil servants. On this occasion they selected as their sacrificial lamb the Register of Business Names.
Consumer organisations, business, industry, chambers of commerce, the professional associations—particularly the solicitors' professional association—have all given strong evidence to the Government saying that they find the register an extremely valuable service and that they do not approve of the alternative proposed by the Government.
The Government say that a central registry is not needed and that it will be sufficient to have a requirement stating that the names of people running a business should appear on business notepaper and be displayed at the place of business. That is less adequate as a means of protecting the consumer than a central registry, but there is some merit in the proposal. It should also be adopted. That would be an improvement on the system, rather than an alternative way of carrying it out. The vast majority of people using the register want to continue to use it. They find it a useful service and they are prepared to pay for it. But they are now to be denied that service. It is ridiculous that the Government should ask for comments but pay not a blind bit of attention to what they have been told.
The argument has continued for some time. It is not the first time that the Register of Business Names has been considered in detail. As far back as 1962 the Jenkins committee on company law reform said that it was a useful register and argued that it should be strengthened. It suggested a process of annual registration, bringing the register up to date, and so on. Now, the Government say that it is not comprehensive because not everyone registers under it. Perhaps we should look at that and see whether we can strengthen the register rather than abolish it. The fact that it is not comprehensive does not appear to have dissuaded many of those who use it from arguing for its retention. By all means let us strengthen it in some way and make sure that it is not in any way a burden upon the public, that it is self-financing and perhaps even profit-producing for the Government.
For reasons that have not been stated convincingly, the Government remain obdurate to the criticisms that have been expressed inside and outside Parliament. We are not clear about the real reason for the Government's continued adherence to this policy.
When the Bill was presented to the House, the Government, under the then clause 30, took powers to sell off the Register of Business Names, but, as the then Under-Secretary of State had to explain rather lamely in

Committee, they could find no takers for the information. The result is that it will be disposed of some time in April 1982, when all the paper will be recycled. All that useful information is to be destroyed. This is foolish Government ritual adherence to a view to which they have committed themselves without proper consideration of the arguments.
The weight of opinion is against the Government's proposals. It would do them little harm to say that on further consideration of the matter they have decided to change their mind. Indeed, they would get a great deal of credit for it. However, unfortunately, there are many signs that the Government have lost their marbles in more than one direction. There was the foolish decision of the Secretary of State for Energy, which we heard earlier today, and oddities such as a referendum on local government rate increases. There are signs all over the place that some sweeping insanity is running through the Government. The continued pig-headed obstinacy in decisions such as this is further evidence that the Government are in a sad state of decline and decay.
I hope that other hon. Members will join in this last plea to the Government to show a little common sense on this provision. At the end of the day it makes no sense to abolish a service that people want and for which they are prepared to pay. I should not have thought that that was any part of the Conservative Party's outlook, and I should not be surprised if some Conservative Members do not appeal to the Government to change their mind. In the perhaps forlorn hope that common sense might break out, I ask the House to approve the new clause.

Several Hon. Members: rose

Mr. Speaker: Order. I remind the House, in case it is under a misapprehension, that although we have changed the order in which we are considering amendments, we are discussing new clause 29 as well as new clauses 1 and 38.

4 pm

Mr. Anthony Beaumont-Dark: I do not share the sentiments expressed by the right hon. Member for Lanarkshire, North (Mr. Smith) in his more excitable phrases, but if someone had lost his marbles the register might at least enable one to find out whether that person was honest.
I shall not make a long speech, because we tend too often to repeat each other's arguments. The Under-Secretary of State for Trade is a personal friend whom I greatly respect and I have had lengthy correspondence and conversations with him on this matter. I am disappointed that I have been unable to convert him to my view.
My view is not only a personal one. It is shared by a number of bodies for which I have great respect. I appreciate that Ministers have to respect the opinions of their civil servants and advisers, but I believe that if there is any doubt the benefit of it should be given to those who have to carry on the workings of this country, which is business.
When companies such as Shell tell me that the abolition of the register will be a retrograde step, I lay great store by their views. The Birmingham chamber of commerce, the biggest and easily the most successful chamber of commerce in the country, also says that the Government's action is a retrograde step, and that view is shared by the banks, debt collecting agencies, solicitors and accountants. 


I believe that the financial savings involved are the least important element. Indeed, in all the pleas that the register should be retained it has never been suggested that it should be a loss-making venture. Of course it should be costed, and if industry wants to keep the register it should be willing to pay a proper price.
I hope that even at this late stage the Minister will think again, because unless more convincing arguments can be produced I shall support the Opposition in the Division Lobby.

Mr. Martin Stevens (Fulham): I am sorry that the right hon. Member for Lanarkshire, North (Mr. Smith) feels that the proposal is a sign of creeping insanity on the Government's part. The Government are not totally free from creeping insanity—what Government are?—but usually the creeping of Governments is in the opposition direction from that to which the right hon. Gentleman refers.
I have had the distinction of serving on two Companies Bill Standing Committees, and I know that we usually go to enormous lengths and vast expense to introduce new bureaucratic procedures in the hope of catching the tiny number of rogues and cowboys who could be better and more cheaply caught in other ways. I thank goodness that the Government are moving in the opposite direction and I shall support them if the House divides.
The Register of Business Names contains about 2½ million names, and at least 1 million of the entries are out of date. It can be argued that a number of firms that the authorities wish to catch, or dissatisfied suppliers and customers need to identify, will be among the entries that are out of date or inaccurate.
The Bill ensures that those who wish to identify either a trader's name or those behind a company will have a much better chance of doing so and of obtaining accurate and up-to-date information if the law requires that such information has to be exhibited at the place of business. Like other hon. Members, I have used the register and I know that the registrar has never been able to keep the list up to date, and I see no prospect of his ever doing so.
The register could be operated on a commercial basis, but those who are offering to pay are not generally the businesses that need to identify the ownership of other businesses. They are searchers who seek to earn money by gathering information from public sources. There has been no suggestion by any of the bodies to which the right Member for Lanarkshire, North referred that the cost of searches should be increased.

Mr. John Smith: Yes, there has.

Mr. Stevens: Somebody else will be asked for the extra money.

Mr. Clinton Davis: I thought that the hon. Gentleman was present during our debates in Committee, but it is obvious that he could not have been listening to them. Did he not hear time and again in Committee, and has he not read in the volumes of information supplied by interested bodies, that we require not only an increase in the registration fee, but an increase in the search fee, with a suggested price of £1?

Mr. Stevens: I am grateful for that intervention. If I am wrong I withdraw what I said. 

I heard the hon. Member for Hackney, Central (Mr. Davis) suggest in Committee that the search fee should be increased, but while the lobbying that we have received from public and other bodies and letters that I have received suggest an increase in the registration fee, I have had no letters suggesting that the search fee should be increased. However, that does not prove that such letters have not been written and I cheerfully withdraw my earlier remarks.
The Government propose that the State bureaucracy should be reduced and that better provision should be made available to individuals and firms who find that, even though they go to the registrar, they cannot get accurate and up-to-date information about who owns a firm. I believe that that is an improvement. We may find that it is not, in which case we can consider the matter again. The Government's case is surely that the present gigantic list for which we are paying is less accurate as a source of information than the proposal in the Bill.
As a matter of principle, I am grateful when legislation proposes to reduce bureaucracy. Too often, company legislation from Labour and Conservative Governments has sought to increase bureaucracy without providing a corresponding benefit to the citizen.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): I am sure that the House would not wish to let the occasion pass without acknowledging the great loss that company law has suffered with the death of my late right hon. Friend the Member for Crosby (Sir G. Page).
There is a tragic irony in the fact that a Companies Bill should take such a prominent place in the business for the first two days that the House will sit without the benefit of Sir Graham Page's wisdom and authority. We shall remember him in a number of capacities. I worked closely with him in Government during the previous Conservative Administration and greatly appreciated his personal kindliness and readiness to advise and help.
It is right that on this occasion we should remember particularly Graham Page's expert, weighty and distinctive contributions in the past four years, when legislation on companies has been before the House virtually continuously. I shall remember him particularly as a most formidable—I should say the most formidable—member of the Standing Committee on the 1979 Bill and for his penetrating contributions on the Floor of the House at the various stages of that Bill and the one now before us.
The student of company law will be able to gauge the extent of Graham Page's influence by studying the records of our debates and by the provisions, small and not so small—section 79 of the Companies Act 1980 on company secretaries, for example—in the legislation which derived from his meticulous and persistent concern for company law. He is very much missed in this debate.
I have listened with great care to the arguments advanced by the right hon. Member for Lanarkshire, North (Mr Smith) and I have studied his new clause. I do not intend to dwell on the technical deficiencies that would result from the inclusion of new clause I—the effects on new clauses 30 and 31, for example. I shall devote my remarks solely to the main theme of the proposal, to which the right hon. Gentleman spoke, namely that the Registry of Business Names should be retained. That is the issue. We are agreed as to the objective, that persons who do business with an organisation carried on under a name


other than that of its owners should be able to find out details of that ownership. Those are perfectly reasonable and proper objectives. We are divided only on the means by which that objective can best be achieved.
I recognise the sincerity of those who have argued for central registration and who wish the Government to retain, possibly with some improvements, the system that has operated for the past 65 years. I acknowledge, of course, the comments of my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who has consistently expressed to me the view that he has expressed so strongly this afternoon. I know that many people have found the existence of central registration useful, and I understand their natural reluctance at the prospect of its removal.
However, I ask the House to put aside such arguments in its consideration of the basic issue. The extent to which people may have become accustomed to an existing system is no test of its effectiveness, and no justification for arguments against consideration of any change. Even if the existing records were a reliable basis for the many important decisions which require disclosure of information about business ownership—we agree that it is not true that the records are a reliable basis—we should consider only whether the objective of such disclosure, in the circumstances of the business concerned, could best be met by central registration, the old pattern, or by means of the Government's alternative proposals, the new pattern outlined in the Bill.
We must consider first the sort of businesses that are covered by the present register. It is true, of course, that some are large and well-known trading organisations such as Lilley and Skinner or Freeman Hardy and Willis, which are both business names of the British Shoe Corporation Limited, but the overwhelming majority of the 2½ million small businesses are owned by one or two private individuals. Such persons do not want or need the formality of company incorporation, where centralised registration is necessary to ensure compliance with the many detailed requirements that the Companies Acts properly impose in return for the privilege of limited liability, that is available to such bodies. The legislation with which we are concerned today, the business names, impinges on them in only two respects—that they should disclose the ownership of the business, and that some control should be exercised over the name under which they choose to trade.
Against that background, let us consider the objective arguments relating to central registration. In theory, it should provide a central repository of accurate information, both current and historic, relating to all the businesses within the scope of the legislation which can be accessed in confidence by any person. How can that be achieved? Clearly, the first requirement is that businesses should register. Although the present legislation provides penalties against non-compliance, we know that those penalties have been ineffective for a long time. I remind the House of what I said in Committee, that inquiries of users of the registry some years ago showed that approximately 40 per cent. were unable to find the information that they needed. That point was strongly supported by my hon. Friend the Member for Fulham (Mr. Stevens), who said that more than 1 million entries on the register were known to be completely out of date. It is interesting that samples taken in typical shopping areas in

April this year showed an even lower rate of compliance. Only about one-third of the businesses which should have registered had done so.

Mr. Clinton Davis: Is the Minister saying that quite suddenly compliance with the business names registry requirements has diminished to one-third from the figures that he gave of 60 per cent. not so long ago? What has accounted for that? We know, of course, that over the years the banks have begun to make the system work by policing it reasonably effectively. How does the Minister square what he says now with the information that he gave in Committee?

Mr. Eyre: The process of registration under the Register of Business Names has been declining and continues to decline. Moreover, it was declining when the hon. Gentleman was the Minister responsible for its administration, and it has continued to decline under the present Administration. The testing areas included an area in or adjacent to the hon. Gentleman's constituency of Hackney, Central. It revealed the great difficulty that in the inner cities, in particular, there has been a remarkable fall in compliance with the requirements of registration. Consequently, an enormous number of businesses are failing to comply. I ask again: how is the enormous number of businesses that currently fail to register to be persuaded to comply? Until that question is answered satisfactorily, questions about regular returns or more regular renewal of licences or other means to obtain the accuracy or availability of registered information are irrelevant.
The immediate answer, of course, is that the only way to achieve satisfactory compliance is by a policy of vigorous and widespread enforcement. However, I must emphasise that, given the scale of the problem, no Government have ever contemplated providing more resources than would enable successive registrars to investigate particular complaints about non-compliance. That is all they can do. That is certainly our position. We do not believe that it would be a proper use of Government resources to put hundreds, if not thousands, of man years of effort into an exercise which could only be done effectively by personal visits to every business premises in the country. According to the right hon. Gentleman's proposals, that would only be a start. Once the register had been brought up to date, he says that it would constantly be checked to ensure its accuracy. All that, while no doubt desirable and attractive in the abstract, would need to be reflected in the fees charged for registration or inspection.

Mr. Beaumont-Dark: My hon. Friend makes it sound as though he is doing industry a service and a kindness by abolishing the list. Will he explain to me—if he can, I shall be happy to support him—how people as sensible as the members of the Birmingham chamber of commerce, which he and I know to be the best chamber of commerce in the country, keep on saying that the register should be kept? Who am I to believe in this difficult world?

Mr. Eyre: My hon. Friend the Member for Selly Oak knows that I am always humble in claiming to interpret with precise accuracy the movement of opinion in any part of Birmingham, and that applies to the views of the chamber of commerce. It is interesting to learn that business men tend to favour the old system and are


reluctant to accept the independent evidence that it is not working. The truth is that many of the people in the chamber to which my hon Friend referred do not deal with small businesses.
The crucial practical aspect that I wish to put to my hon. Friend is that if we sought to enforce the whole old-fashioned system and to muster the resources to do so, the fees would need to rise to much higher levels than anyone has mentioned in this debate. Those fees would ultimately fall on the small businesses that make up the 2.5 million membership on the register. To go round the streets and compel companies to complete the forms and pay higher fees would give rise to great resentment and misunderstanding. I apologise if I appear to differ from the Birmingham chamber of commerce, but that is my view.

Mr. Clinton Davis: The Minister mysteriously referred to "independent evidence". Will he divulge the nature of the independent evidence? I know that mysterious officials have been going round nooks and crannies in various constituencies. Indeed, they went to Hackney, South instead of Hackney, Central. During the recess, the Minister has no doubt been helping them in some way. However, what is the independent evidence?

Mr. Eyre: The independent evidence is the great number of those who are ineffectively making searches in the registry. There is a 40 per cent. failure rate in terms of effectiveness. That is the regular evidence of non-availability.
When I remind the House that, even to recover the substantial deficit on the current costs of the present imperfect system, those fees would have to go up from £1 to at least £5 for registration and from 5p to £1 for each inspection of a record, hon. members will readily appeciate the financial implications of the proposals put forward by the right hon. Member for Lanarkshire, North which would require even greater increases. Hon. Members must consider the effect of an extra levy—through increased fees—on small businesses in their constituencies. They must consider that it would be necessary to exact that from the 2.5 million people on the register.
The businesses concerned see no positive benefits from registration and, moreover, there must be a limit to the price searchers are prepayed to pay for information, particularly if it can be obtained more easily and cheaply by other means. That is the positive side of the alternative system.
The right hon. Member for Lanarkshire, North even went so far as to suggest that there should be a duplication of the proceedings. He suggested that small businesses should be subjected to increased fees and that they should also be required to comply with the requirements of the alternative system. The imposition of such expense on small businesses cannot be justified.
The alternative means are contained in the Government's alternative proposals, which are enshrined in the Bill. I have no hesitation in commending them to the House as a practical solution to the problems to which I have referred. I am happy to pay tribute to the many constructive suggestions that have been made since our proposals were first outlined—many of which are reflected in the amendments introduced in Committee and in others that will come before the House. The new proposals

provide three methods of disclosure of details of ownership: first, by display at all business premises to which the public have access, and secondly, by publication on specified business documents. I emphasise that that includes business letters, invoices, receipts, demands for payment and written orders for goods and services. Thirdly, disclosure may be obtained in writing immediately on demand by any person with whom anything is done or discussed in the course of business. Taken together, these measures will enable a dissatisfied customer or supplier to obtain the information essential to any legal action at minimum cost and inconvenience while not increasing the burden on the businesses concerned.

Mr. Clinton Davis: I am trying to help the Minister. He continually stresses that the person who wants the information will incur a minimal cost. Let us suppose that a man who lives in Manchester engages in a business transaction with someone who lives in Birmingham and that he receives no response when he writes to that person for information. What is he to do? How will he minimise the cost of the searches that will be required? What will it cost him to ensure that someone goes to look at the premises to see whether the information is there? The Minister must answer that question. He did not do so in Committee.

Mr. Eyre: The hon. Gentleman has envisaged a person in Manchester who wishes to do business with someone in Birmingham. He has envisaged that, in accordance with the requirements of the Bill, the person in Manchester has written to that other person and has quite properly asked him for particulars of ownership. The hon. Gentleman has supposed that the man has received no reply. The fact that the Manchester man has been drawn to make that inquiry and to pose the question is highly relevant. In addition, he must be writing to an address and I would suppose it to be the address that the business was being carried on from. The inquirer must have written to some address.
The inquirer is at least in a better position than he would have been if he had to send to London to search for particulars. First, he has been warned by the absence of any response. Secondly, he could complain to the Department of Trade about non-compliance. Indeed, that often happens now. Alternatively, he could ask the local trading officers to make an inquiry. The inquiry would probably be beneficial and of the type that they carry out in the course of their normal duties. The hon. Gentleman has described someone who appears to be carrying on his business in an irresponsible way. Therefore, it is highly likely that he would have come to the notice of the trading standard officers. I emphasise that the fact that the inquirer has put his mind to the matter and made an inquiry is a distinct advantage.
I have described the three methods of disclosure of details of ownership. Taken together, these measures will enable a dissatisfied customer or supplier to obtain the information essential to any legal action at minimum cost and inconvenience whilst not increasing the burden on the businesses concerned. In particular, because it will not be necessary to refer to some possibly distant central registry, the information will be available more quickly at the point where it matters. Such information is available in the hundreds and thousands—even millions—of transactions that take place among respectable and responsible business men every week. 


If the man in Birmingham—envisaged by the hon. Member for Hackney, Central—were a defaulting business man, he would not have complied with a central registration system. A large percentage of unscrupulous business men do not do that.

Mr. Clinton Davis: The Minister continually jumps to all sorts of absurd conclusions. The mere fact that the man might not be thoroughly scrupulous does not mean that he would be debarred from seeking facilities from a bank. A bank would invariably request that particulars of registration be produced. Even an unscrupulous business man might be persuaded to comply. The Minister continually raises improbable situations in support of his improbable arguments.

Mr. Eyre: The hon. Gentleman knows that under the present system of registration a person can write to the central agency and receive one of its certificates. It could be used for fraudulent purposes all over the place. There is no check on the issue of such certificates. It is recognised increasingly that it has little value in that respect.
Much has been said about the possible difficulty of reinforcement. Compared with the present system, which relies solely on centralised enforcement, with the unsatisfactory results to which I have referred, the new requirements will, to a considerable extent, be self-enforcing.
Any person having dealings with a business carried on under a name other than that of its owners will be able to see immediately whether the information is disclosed as required. If it is not, the person will be able to ask for it. That is an important right which does not exist at present.
If the information is still not forthcoming, the person may either take action himself to secure compliance through the courts, or seek the support of the Department in the way that I described in answer to the question by the hon. Member for Hackney, Central (Mr. Davis).
The police and local trading standards officers will also be able more readily than at present to take account of offences against the requirements in the course of their normal duties.
Finally, I intend to introduce a sanction of civil disability, as hon. Members can see from the Order Paper. I ask the hon. Member for Hackney, Central to take account of that. With his legal experience he will recognise the practical importance of that. I shall introduce a sanction of civil disability which will enable any person who can show that his position is prejudiced in law by tha absence of this information to ask the court to prevent the enforcement of the summons issued against him by the business concerned. I hope that my hon. Friend the Member for Selly Oak will take full account of the extra provision. I believe that the civil sanction will substantially strengthen the whole system of self-enforcement, which will be an important element in the new system. It will be apparent if people are not complying with the requirements of the Act. Customers everywhere will be in a better position to enforce their rights in respect of the Act.
The existence of this power should alert the businesses concerned to the dangers of non-compliance with the new requirements, which will be widely publicised following the enactment of the Bill. By these means we look to ensure a smooth transition from the present regime. 

I shall now refer specifically to the arguments advanced by the right hon. Member for Lanarkshire, North in support of the proposal embodied in new clause 38 that the present record should be retained for a period of six years after the repeal of the 1916 Act and that it should be available for inspection throughout that period. I remind the House that we invited organisations that might be interested in the retention of the records to submit proposals, subject to certain conditions including continued public access.
As I explained in Committee, although a number of organisations responded, none was prepared to accept the conditions. In particular, it was considered that the value of the records would diminish rapidly in the absence of any statutory registration requirement. As I have explained on several occasions, this is not an area in which the Government consider statutory registration to be justified, any more than experience has shown it to be effective. In any event, it would not have been appropriate to devolve statutory powers to a private organisation. On that basis we withdrew in Committee the clause that would have expressly permitted the Secretary of State to dispose of the documents.
There are practical grounds on which I oppose new clause 38. In addition to the present deficiencies, the records will diminish in value following the repeal of the statutory registration requirement. In those circumstances, I do not believe that it would be right to devote the Department of Trade's resources to their preservation and to the maintenance of the public search facility, even with the payment of increased fees to cover the cost involved.
Much of the material held by the registrar is already out of date. With the considerable number of businesses that have no registered, that makes the record so unreliable as to cast considerable doubt on its value at any time. That will certainly be so when registration ceases.
Our alternative proposal to allow the continued provision of information about business ownership will take effect immediately on repeal. There will be no gap in the information and no need for elaborate transitional arrangements envisaged in the new clause. I ask the House to accept, therefore, that, on the repeal of the registration requirements, there will be no administrative need to retain these papers, although, as is usual when statutory records are no longer required to be retained by a Department, the Public Record Office will consider whether any of them have long-term historical value.
I ask the House to reject both concepts contained in the new clauses. I hope that right hon. and hon. Members will recognise that the Government's proposals afford a sounder basis for ensuring to those who need it the basic right conferred by the original legislation.
The importance of the right has been demonstrated clearly by debates generated by the Government's proposals. Although there will be economies in Government administration as a result of our proposals, more importantly, we believe that they will enable the necessary information to be obtained far more easily than at present. The information will be available at the point of sale in the consumer's locality.

Mr. Clinton Davis: The last time that we debated new clause 38 the Minister invited me to a party to celebrate the recycling of all the information contained in the registry. I believe that was to be in April 1982. Will the Minister also invite me to the party to herald the recycling


of speeches which have been distributed among Back Benchers in the last five minutes to encourage them to participate in the debate, when obviously they know nothing about it?

Mr. Eyre: I am amazed that the hon. Gentleman has been able to observe so keenly what has been going on on the Benches behind him, where hon. Members are being encouraged to take part in the debate. I see that the hon. Member for Walsall, South (Mr. George) has taken his papers and is keenly awaiting the opportunity to take part.
With a feeling of great friendship, I repeat my invitation to the hon. Member for Hackney, Central, should the Public Record Office in due course decide that it wants only a small part of the records. If recycling proceeds, the hon. Member will be welcome if he wishes to accompany me to the ceremeony.
I stress that our proposals will make available the necessary information to consumers far more easily than at present. Primarily on that basis, I ask hon. Members to oppose the proposals advanced by the hon. Member for Hackney, Central. They would effect only marginal improvements at a much increased cost and they would only improve the old system of registration, which experience has shown to be unworkable.
I ask Opposition Members to accept the evidence that it has not been possible to make the 1916 registration system work properly, and also to recognise that throughout the years no Administration have been able to devote the resources necessary to police the system properly, to enforce the regulations and to make them work. Therefore, I believe that in due course people will welcome the fact that the problem has been gripped and that new alternative proposals have been brought forward.

Mr. Tristan Garel-Jones: Can my hon. Friend estimate the cost to the Exchequer of making such a system operative and viable? Has any work been carried out in that respect?

Mr. Eyre: My hon. Friend knows that a great deal of thought has been given to the subject. There is no question of any cost to the Exchequer. The proposal is that a fee be charged to those who use the system to cover the cost of registration. That is agreed ground. My hon. Friend may not have been in the Chamber when I explained that the practical problem is how to ensure that 2½ million small businesses comply with the registration requirements. The current percentage of default is far too high. Evidence shows that in many parts of Britain default is increasing.
The system of central registration cannot be said to be working in anything like a satisfactory manner. Our inquiries show that the only way to enforce the system is to devote a large number of man hours to carry out street by street and door by door inspection, requiring small businesses to complete the relevant documents, and to send them to the central registry. The cost of such an operation would be so high that the small businesses, for whom my hon. Friend has great concern, would be unwilling to pay for it. That is why we are asking people to consider our positive new arrangements. They do not involve the problem of operating the central registry system that we have found unworkable. We must accept the evidence of life and adopt a new system with a self-enforcement quality. That would be in the interests of consumers as well as small businesses.

Mr. John Fraser (Norwood): Has the Minister considered a simple adaptation to the new clause, namely that a civil contract should be unenforceable unless the registration number of the certificate issued by the Register of Business Names appears on the notepaper? Would that simple device lead to increased compliance with the law by small businesses?

Mr. Eyre: I am obliged to the hon. Gentleman for putting forward a positive proposal that relates to a later amendment. He knows that we are not currently discussing that amendment. I am willing to consider any ideas to improve the system as a whole. I have adopted a number of proposals. A technical and practical difficulty arises on the hon. Gentleman's proposal. If he will forgive me, I shall refer to that in more detail when we deal with the amendment. I appreciate that he has been looking ahead and has made a positive contribution to improving the alternative system that we have developed. In the long term, that system will benefit consumers.

Mr. Bruce George: I apologise for the fact that I was not in the Chamber for the first part of the debate. I am a member of the Defence Committee that had a unique meeting with its counterpart in the United States of America, the Armed Services Committee, which prevented my being here before now. However, having heard the Minister's rather unconvincing arguments in Committee, I do not think that I have missed a great deal.
I have had a few months to re-read the hon. Gentleman's speeches. I had hoped that the enormous pressure that had been brought to bear—not only by Labour Members, whom the Minister may choose to disregard, but by many other organisations including those that had, I repeat had, an affinity with the Conservative Party—would result in the Minister reconsidering what many regard as a loony proposal.
We know that the Government are fanatically anti-quango. We understand that there may be a case for chopping them off at the knees if they are undesirable. However, an organisation such as the Register of Business Names must be regarded as effective, despite the difficulties of enforcement. There is no reason why the functions of that organisation should be emasculated. The Minister argued that enforcement achieved only a 60 per cent. success rate. He should talk to police chiefs, many of whom would be elated if their enforcement success rate approached anything near 60 per cent. It is closer to 16 per cent. in some areas. To argue that there is only a 60 per cent. success rate is saying that because the police cannot catch all criminals we should wring our hands, leave the game to the criminals and have no enforcement.

Mr. Garel-Jones: The hon. Gentleman's suggestion is outrageous. He is equating the small business community with the criminal classes. That is an extraordinary statement.

Mr. George: I did not say that. You may have misconstrued what I said—

Mr. Deputy Speaker: "You"?

Mr. George: I apologise, Mr. Deputy Speaker. I was not equating you with the criminal classes. My remarks were misconstrued. Undoubtedly, there are some criminals among the 2¼ million small business men. I was making the important point that enforcement must be valid


and proper. Simply because there cannot be 100 per cent. enforcement, in any respect, it does not mean that enforcement should be abandoned.
Statistics show that there were 100,000 inspections in a recent six-month period. That was a 14 per cent. increase on the previous six months. We are talking not of an unviable entity but of a widely used service. I do not wish to exaggerate, but I am troubled that we are seeing the philosophy of almost a Hobbesion state of nature.
Last weekend I was approached by a constituent with a complaint about the planning appeal procedure. He was adversely affected by a proposed development and claimed that he had not been properly informed of the proposal by the local authority. He was told that the application had been housed in the library and that a small advertisement had been placed in a newspaper. However, because no one had commented he was told that it was tough luck that he had not seen the advertisement and that he could not complain if the planning application was approved and his environment adversely affected. I suspect that that is a parallel with the matter that we are discussing. The service may be somewhat old—

Mr. Nicholas Baker: rose

Mr. George: I shall be delighted to give way to the hon. Gentleman. He had the opportunity to debate these points in Committee, but he did not take it. However, he did say that the register went back to 1916, as though samething 60 years old must be abandoned. As the Conservative Party is held to have such veneration for age and institutions, that argument is spurious.
The Minister taunted Labour Members with not being present in large numbers for this debate. He should remember that the Conservative Party is supposed to be the party of business. A few months ago The Times stated: 
It remains to be seen whether there are any on the Conservative benches in the Commons who will speak up for the public's right to know which individual or company is trading and under what name.
The answer to be given to the author must be disappointing. Members of the party of business have not turned up in the Chamber in large numbers. If they do it will be to vote, and they will vote as their Whips tell them. The interests of the 2¼ million small businesses, which are ostensibly represented by the Conservative Party, are undoubtedly being jeopardised. That is happening, not gigantically, but in a small and important way.
The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) spoke about the representations of the Birmingham chamber of commerce. Representations have been made from many sectors. The Government should recognise that that chamber has presented an overwhelming case. Representations have been made by the Newspaper Proprietors Association and the CBI. That latter organisation is hardly in the van of revolution, but it is much opposed to the Government's proposals. Other organisations that take a view contrary to that of the Government include the Press Council, the Institute of Trading Standards Administration and the consumer lobby. Included in the list are the Consumers Association, the National Consumer Council and the National Federation of Consumer Groups. There are many more. In Committee we received representations from the Law Stationers Association, which is a reputable organisation, and from compaines such as Services to Lawyers Ltd.
The purpose of these organisations is not merely to knock. They are not approaching the subject destructively.

They are presenting a constructive alternative. No one is arguing that the register is perfect, but the principle behind it is that anyone conducting a business in a name other than his own should register. I admit that enforcement is far from perfect. There are cowboys who are not registering and who are getting away with it. Our object must be to improve enforcement, and not merely to abandon it.
If the Government's proposals are implemented we shall do a disservice to investigative journalists. There are not as many investigative journalists in Britain as there are in the United States. An important function in a democratic society is performed by journalists who burrow away and produce information that it is in the public interest to publish. Members of Parliament are not able to do so to the degree that they should because of lack of staffing. We should be worried, not for the specific journalists but for the function that they perform.
There are many who regard the Government's proposals as a fraud's charter. That term may be rather journalistic, but I believe that it is true. I speak, not on behalf of creditors but on behalf of a number of organisations that operate in this area and have expressed their anxieties. The enforcement authorities have expressed their anxieties—for example, the police, trading standards officers and tax and customs officials, who all require information to protect the consumer from the fraudulent and the unscrupulous.
It seems that the Government have made up their mind. Their loyalists are behind them on the Government Benches, and those who are not present will emerge in force to deliver to the Government a majority which they do not deserve but which they will get. When individual Members return to their constituencies they may be lobbied by their chambers of commerce and by those engaged in small businesses. They will rightly have to face considerable criticism.
It was said at Blackpool last week that about 70 measures have been enacted to benefit the small business community. I have spoken to many small business men in my constituency. It appears that if 70 "helpful" measures have been enacted, most of the small business men in my constituency are oblivious to them. Little benefit seems to have accrued to the small business sector in my constituency, which is suffering over 17 per cent. unemployment.
This is not a major Government decision that will have an obvious and dramatic effect on the entire economy. It is a decision that is almost incremental. It is part of a drip, drip, drip process. The business community wants to become more efficient. The consumer wants to be protected against fraud. The Government's proposals will make life easier for crooks and cheats. The inhabitants of Pentonville and Strangeways probably do not write to Ministers in support of their legislation, but some of them may endorse these proposals. When they leave their present surroundings, and when these proposals are implemented they may find that they are to their advantage. That is the solid block of support that the Government will seek at the next election. It is probably the only group that will support the Conservative Party.
There are many who look to the Bill as a means of improving the lot of business men. The Consumers Association may have given up the ghost. It may now accept that the Government will not advance significant measures of consumer protection. However, we did not


count on the Government's enacting legislation to detract from the already inadequate legislation to protect the consumer.
I accept that miracles do not occur in political life. However, in the next 10 minutes or so I hope that the Minister's conscience will be stricken or that he will be fearful of the consequences of the folly of his Government. Perhaps he is convinced by the arguments that we have advanced. He should pay far more attention to Labour Members and Conservatives who have made representations to him. Surely there are means short of what the Minister is proposing. I am not a great supporter of self-regulation, but if the register is to be scrapped there must surely be alternatives short of the disastrous proposals that have been presented to us.

Mr. Robin Squire: I begin by declaring a possible interest in my role as a consultant for Lombard, North-Central Ltd. That interest is certain, but I am not aware of the company's corporate views, if it has any. Its views may be the reverse of those that I am about to express. In common with the hon. Member for Walsall, South (Mr. George), I was unable, because of parliamentary business, to be in my place for some of the earlier speeches in the debate. I hope that the House will accept my apologies.
The hon. Member for Walsall, South shares a distinction with me that may be unknown to many hon. Members. On certain cold and blustery days the hon. Gentleman is the last bulwark of defence in the parliamentary football team. I am the penultimate bulwark. Those who do not understand the game may think that that indicates that we are often in sympathy. However, those who have seen us play would not form that conclusion. I shall not break our fine record by agreeing with his remarks.
On balance, the Government's proposals are a marginal improvement on those that were previously before us. I did not take that view originally. When the proposed legislation first appeared I had some doubts. I listened to the representations that were made by various organisations. I listened especially to the representations of those whom we agree to call investigative journalists and who are employed by the BBC in producing programmes for radio such as "Checkpoint", and by other organisations. They have argued strongly that the existing powers should be retained.
One of the advantages of a Summer Recess is that it gives one an opportunity to consider measures away from the hurly-burly that we face at other times of the year. Further consideration has led me to believe that there has to be change. I accept the reasons that have been advanced for that change. If we examine the current scheme in isolation, we cannot be happy with it. It appears that the cost of making it more satisfactory and effective will be either prohibitive or, in practical terms, a near impossibility. If that is so it does not mean that we have to amend the scheme, but there are further grounds for suggesting that clauses 28 and 29 carry with them the possibility of some improvement and therefore can be commended on their own, even without comparison with the present situation. 

5 pm
As my hon. Friend the Minister and others have repeated in many areas, if there is a high degree of inaccuracy—the figure of 40 per cent. is widely quoted—we must realistically explain to many of those who come to us that, notwithstanding the trust and reliance that they may previously have placed upon their investigations, on average at least 40 per cent. of that trust was misplaced.

Mr. Clinton Davis: What is the extent of non-compliance with the requirements of the Companies Acts with regard to the registration of company records, accounts and so on? Is there full compliance? If there is not, does the hon. Member suggest that the Minister should be recommended to do away with the companies register?

Mr. Squire: In part, the hon. Member makes a valid point. I, too have spoken out on that matter. The Companies Acts contain areas where we could and should tighten up, and where existing legislation is not complied with. I am not sure that that is the same context, because no one is suggesting an alternative to replace the Companies Act, whereas we are discussing, and we discussed in Committee, a credible alternative that may make the compliance and accuracy of the information better than at present.
One of my constituents who runs a small credit-searching business came to see me. He was concerned about this whole issue. Some of those who come to see us may say that the present information is better than nothing, but I am not so sure. If we were to allow businesses and individuals—we are talking about individuals and consumers with whom the companies deal—to delude themselves into believing that they have accurate information, the ultimate cost to them and to the community generally, and the lack of trust that that would engender in trading activities, could be greater. Therefore, there is a case for change.
The economic argument has been mentioned. It would be possible to increase fees. My constituent who came to me suggested—as others have done—that he would be prepared to pay a much higher fee. That willingness is in no doubt. However, is that the end of the argument? I submit that it is not, not least because the cost would keep rising. The figure per search that has been quoted—£5 or more—is high. Essentially, £5, £6 or any other figure would not make correct what is incorrect. In other words, if the underlying accuracy of the information is suspect, no amount of self-financing, while welcome in an economic accounting sense, can change the fact of the underlying inaccuracy. To some extent, whilst the financial considerations have been raised, the heart of the problem has not been tackled. With regard to the registration of names, clauses 28 and 29 could be a better way of doing things and I look forward to seeing the effect of those clauses.
I hope that the Minister and his Department will keep the operation of those clauses under review. If it is found that in practice the defences, the information and the protection—which are there to some extent at present—have, unfortunately and inadvertently been reduced beyond what was anticipated, I hope that the Minister will listen sympathetically to further representations with a view to tightening up the clauses, perhaps in what is required to be disclosed, so that we leave people


in no doubt that the protection of the consumer and of companies that deal with such undertakings remains an issue of great concern to hon. Members and to the Government generally.
I recognise that my hon. Friend may suggest that that will not be possible, at least in present circumstances. However, I put in a short plea that we should try to bear in mind the continuing problem of those who set up businesses, close them and carry on the next day from the same address with another business of a totally different name, with, surprise, surprise, the same individuals concerned, and not just one, but a string of 10, 12 or 16 names.
Some hon. Members will know that I have an interest in plumbers—not because I need one at the moment. At least, I did not when I left my house this morning. That area and others similar to it are in danger of being overrun by cowboy, overnight outfits, of which the whole purpose is to make money and to cause considerable human suffering whilst coining fat fees and payments. If it were possible I would suggest that, on the information passed out to those who inquire, all associate undertakings would have to be stated. I am sure that the Minister has considered that. If that is impossible—I am sure that my hon. Friend will explain the difficulties—I urge the Government to recognise those continuing problems. They are not getting any better but are getting worse, as my postbag on the subject shows. 
People ask why we allow these overnight outfits, which do a disservice to any craft or profession that they claim to represent, to be able to carry on in this way. They ask why the long arm of the law, if it finally catches up with such people, takes such a long time to do so. It takes years, when it should take months or weeks. I hope that my hon. Friend will recognise that those comments do not reduce my support for the new clause.

Mr. Eyre: It appears that my hon. Friend is talking about someone trading not as a limited company. That is a different area of difficulty, about which I know my hon. Friend is concerned. I too am concerned, and we shall do a great deal about that in due course. 
With regard to such a person carrying on business virtually on his own account and therefore bearing a heavy personal responsibility, whatever business name he trades under, I know that my hon. Friend will be interested in the argument that this alternative system would more quickly draw the attention of people doing business with him to his unscrupulous nature than would the system of a purported registration. 
Such people have always been unscrupulous and therefore have not registered under the 1916 Act. However, under the alternative proposals they will be obliged to provide particulars to anyone doing businesses with them. It will more quickly be brought to the mind of the person doing business with someone whether he is complying with the requirements of the Act. Therefore, it is likely that a respectable person will be carrying on such a business. I hope that my hon. Friend will find that helpful.

Mr. Squire: I thank my hon. Friend for that interjection. I share his hopes that at least part of the problem that I am identifying will be reduced or tackled in this way. I am pleased to hear his undertaking that we may look forward to a further instalment along these lines. 

Time has enabled me to see the changes in a considerably more favourable light than when they first emerged. We now have a responsibility, which I am sure the Government recognise, to convince many of the bodies that have made representations that the new proposals will not only be as good as, but in many areas better than, those that they supplant.

Mr. Geoffrey Robinson: While willingly associating myself with the concluding remarks of the hon. Member for Hornchurch (Mr. Squire), I can in no way share his confidence—if, indeed, he has any as he is about to embark on the massive exercise of convincing not only the mighty Shell but the Consumers' Association and the Law Society as well. One can hardly conceive of a holier alliance than that represented by two of the partners, and Shell, as a massive organisation, must have very good commercial reasons for its decisions. But if the Tory Government cannot convince their own conference, their chance of convincing such diverse organisations as those that I have just mentioned must be nil. For the hon. Gentleman now to attempt to clear his conscience by saying that the new system will work is simply not acceptable, although I accept that he may well have been drafted in at short notice to speak on a matter which detained us for many hours in Committee. 
In Committee we had the same recitation, with the same lucidity and clarity of diction that we have had today, but not one new argument has been adduced for doing what the Bill seeks to do. Indeed, I do not think that there is a single valid argument for doing it. In asking why it should be done, we come back always to the simple fact that it started when the quango exercise got under way in the early macho phase of the Government's life. I do not know whether it was Sir Derek Rayner who was charged with the job of slashing as many heads as possible in the so-called quangos, or whether it was a departmental exercise in itself, but I am sure that each Department was asked—as is the case with many big corporations—to make some savings. Of that there can be no doubt. It would appear that the Department concerned, faced with a new Government who were known to be after the quangos, looked around to see what it could find. That is the fundamental reason why it picked on a little body called the Registry of Business Names, which was thought not to be functioning particularly well, being said to be only 60 per cent. efficient. 
My hon. Friend the Member for Walsall, South (Mr. George) mentioned the claimed rate of detection of the police force. Although the internal combustion engine is continually being improved, no one would claim that it was more than 30 to 35 per cent. efficient. So what is wrong with a 60 per cent. efficiency rate?

Mr. Nicholas Baker: The hon. Gentleman is in the process of repeating the argument advanced by his hon. Friend the Member for Walsall, South (Mr. George), that a 60 per cent. registration is a success rate. That has nothing to do with the point at issue. We are considering, surely, the number of people or businesses who ought to register as a whole. Perhaps the hon. Gentleman will talk about the people who do not register.

Mr. Robinson: The hon. Gentleman, who served so admirably on the Committee, has made precisely the point that Labour Members have tried to make in Committee and have made today—that the registry is not as efficient as


it ought to be but that there is a case for keeping it and making it more efficient. I agree that it ought to be efficient. The Under-Secretary claims that the new system will be more efficient and that that is why he is introducing it, but he has yet to convince anyone who has listened to the debate in Committee or on Report that there is a single good reason for seeking to make the Registry of Business Names more efficient by the means that he has introduced.
The Under-Secretary is introducing a complex system. The operations of the Registry of Business Names are much easier to understand. Given the new information technology, computers and so on, and all the other new things that we have at our disposal, the registry, so far from being disbanded, should be modernised and made really effective. But, of course, it was a quango, and that is why it was chopped.
We have had a concession from the Government today, in the light of the feelings of the new Secretary of State for Energy and the feelings of discontent that emerged at the Conservative conference at Blackpool. The Government should now also reconsider whether they should be doing something in this Bill that in the end will cost far more money than seeking to improve the efficiency of the registry by the introduction of modern techniques.

Mr. George: Does my hon. Friend agree that the Government's policy, whether deliberate or accidental, of liquidating many small companies, will make it much simpler to conduct a search of the registry?

Mr. Robinson: I entirely associate myself with that point. The case against the change has been forcefully put in Committee and in the House today, and I shall not detain the House further on it. Will the Under-Secretary now answer some questions? Will he admit that the intention is to abolish a quango? The party loyalists are here. They are drafted in to make speeches after two minutes study—

Mr. Squire: I have been listening with rapt attention to the hon. Gentleman. In fairness I should explain that one of the posts that I hold as vice-chairman of the Back-Bench trade committee requires me to look at these matters for a little more than two minutes.

Mr. Robinson: I only wish that the hon. Gentleman's speech had suggested that he had done so.
It is clear that we are faced here with a simple cost-cutting exercise which involves abolishing a quango. It is my contention that the new provision will make it no easier for the consumer and no easier for trading companies to obtain information that is rightly wanted and should be readily available. I repeat my contention that it will be at greater cost.
In abolishing the quango, how many people will be sacked? Perhaps the Under-Secretary will tell us that. All of them have families. We care deeply about the level of unemployment. We see no need—

Mr. Keith Wickenden (Dorking): If it is true that Labour Members care deeply about unemployment, why was it that when we debated unemployment for more than four hours at the end of July, there were only four or five Labour Members present?

Mr. Robinson: The hon. Gentleman's question is totally irrelevant to the debate. Questions concerning unemployment should be directed to the Conservative Benches, because the Conservative Government have, with great callousness, allowed unemployment to rise to a figure of almost 3 million. If the figure is not reached this week, I am sure that it will be reached next month, and that it will be above 3 million next year. When talking about unemployment in general, we must look to the Government for a reply.
Here the Government are abolishing a quango in order to make savings. We have been told that ad nauseam. They are proposing a system which, it is claimed, will be less costly to the Government and the user. Will the Minister, therefore, please say how many people are to be sacked? How much floor space is to be saved? How much equipment is to be disposed of? What savings is the Minister claiming to make? Unless he can convince us of those savings, he will fall far short of convincing us that he will be implementing a new system that is more convenient and less costly. I leave those questions with the Minister and ask him to reply to them.

Mr. Nicholas Baker: I should like first to associate myself with the remarks made about our late colleague, the right hon. Member for Crosby (Sir G. Page). We have had many debates in the last two years on company law, and the debate today seems incomplete without his participation. I mourn his loss, as a know we all do, although on this and many other matters I found myself in disagreement with him.
My first point relates to the evidence that we have been considering in this debate and in Committee. Here I am sorry that my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) is not present. I asked the business men in my constituency whom I know—both large and small—how they felt about the proposal to abolish the Register of Business Names. The response was almost wholly negative. Nearly all admitted that it performed some function, but none had any enthusiasm for it. I found little evidence of people who had actually relied upon it to their credit or benefit. Indeed, I found a number of misconceptions about it. Many small business men actually believed, and still believe, that by registering they acquired some entitlement to use the name. Nothing could be further from the truth. That was the evidence from business.
The evidence of consumer groups and people who search registers must be seen in the context of the job that they do. Of course, they carry out many searches. Of course they believe that if the registry operated as it should—and it is not for them to say whether it does—they would certainly be failing in their duty if they did not make searches. That is why they do so, and I believe that that, understandably, colours the reasons why they generally feel that the registry is useful.
I cannot share the tears shed by hon. Members in this debate for the trade of investigative journalism. If investigative journalists had to rely on the information in the Register of Business Names, I should be more than surprised. They are equipped, as most people in our community are not, to discover—that is their trade—the information that they need.
The evidence that I should like to see is evidence of frauds that have been uncovered as a result of people registering business names—frauds which might not be


uncovered if the registry is abolished—wrongs that have been averted and benefits that have been achieved through registration. The evidence that I have seen is minimal, if not non-existent. That is what we are really talking about. That is the evidence for which we should call in this debate.
I was stung by the hon. Member for Walsall, South (Mr. George) accusing me of not having said anything in Committee.

Mr. George: Anything meaningful.

Mr. Baker: Indeed, I was criticised for saying far too much, although it is true that on those limited occasions when the hon. Gentleman appeared in Committee he was speaking, and therefore out of courtesy I was unable to say anything myself. He seemed to equate the discovery of crimes—the criminal detection rate—with the rate of registration at the registry. As I believe my hon. Friend the Member for Watford (Mr. Garel-Jones) pointed out these are completely different species. They are in no sense the same. We are interested in those people who ought to register and do not do so, and in particular in those who suffer as a result of non-registration. The evidence that I have seen is that there is little or none of that.
My second point relates to savings. Clearly, the savings in people, who one hopes would be redeployed, and in money is very small. Even Labour Members should accept, however, as indeed I think they do, that to make the registry system work would require an enormous expansion in terms of time and money. The potential saving to which we should address our minds, therefore, relates not to the registry as it currently exists but to that which would exist if it were made to function as it should. I have no doubt that the costs would be substantial. Beyond a certain point, it does not seem to me material whether the expenditure is incurred by businesses or individuals registering or by the taxpayer. We may argue on ideological grounds as to which we favour, but the expenditure must be undertaken none the less. I should have thought that unless there were a strong case for incurring that expenditure, we should do what we can to see that it is not incurred.
Furthermore, I do not share the faith of many hon. Members in this or any Government's determination and ability to keep the fees of such a registry up with the cost of undertaking the work. I believe that it is highly likely that the fees would very soon fall behind the real cost of providing the registry service.
Finally, this system of registration is completely different from that of Companies House. The hon. Member for Hackney, Central (Mr. Davis)—and I yield to no one in my admiration of his experience and authority—seemed at one point to be equating the two systems. They are not the same.
Under the companies registration system a company is allowed to come into existence only by virtue of registration at Companies House, and we must be prepared to incur the cost of keeping that registry going.
The registry here under discussion, however, is different. As we know, it was born in order to discover aliens who might be hiding behind other names and running businesses in this country at the time of the First World War. I do not believe that it functions in a way which helps business men, individuals or those who deal with them. 

If there is money and time to be spent on finding out who is misleading the public, it should be spent in the areas where that is taking place, and be in the hands of those seeking to enforce the kind of remedies laid down in clauses 28 and 29.

Mr. Wickenden: When I first began to take an interest in this matter some time ago, I confess to feeling surprised that we were actually to repeal some legislation. This does not go so far as those of us who believe that before any piece of legislation is introduced two others should be repealed, but at least it goes part of the way. Nevertheless, important aspects of the matter have been pointed out by Labour Members.
We must ask ourselves whether the existing system satisfies the wishes that I believe that the whole House shares in relation to business activities.
The Act passed into law in 1916–65 years ago. Since then there has been no amendment to it. That implies one of two things. Either the legislation is perfect and Parliament is satisfied with it, or it is totally ineffective, nobody takes any notice of it and Parliament has chosen to disregard the matter as not being particularly important. There seems to me to be nothing between those two extremes.
We all know that the Act has not worked and does not work. I confess that when I inquired into this matter this morning I discovered that My own public company is in breach of the Act. We trade as Townsend Thoresen and there is no such company. We should be registered under the Registration of Business Names Act, but we are not, and I dare say that we have laid ourselves open to penalties as a result. I suspect that the amount of non-registration is far greater than has been suggested. I dare say that if one walked down the high street of almost any town or city in this country one would find a very high proportion of perfectly honest, decent businesses which are not registered.
We must therefore ask ourselves, first, whether the existing Act works. Clearly, the answer must be "No". Could it be made to work at a reasonable cost? Is there a better alternative, or indeed any alternative at all? Sometimes people think that there are not alternatives to things. How many businesses are on the register? How many companies are on the register as businesses? I suspect that they make up a high percentage of the total. Many major companies register because they have to, although my own company has not. Yet everyone knows, for example, who carries on the business of Shell. In many ways, they need not be on it.
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It is also worth remembering what the registration requirements under the Act are, because they are minimal. A business that trades under a name other than the names of the proprietors shall register the names of the proprietors, the principal place of business—although not all the places of business—and whether any of the proprietors are other than of British nationality. There is no requirement to file accounts on an annual basis as there is under the Companies Act. There is a requirement to file a notice of change, but in the very nature of things these matters, even when complied with, are so far behind that they are of very little use either to investigative journalists, credit control departments or anyone else.
Indeed, I inquired of my own credit control department how often we had searched the Register of Business


Names register. The answer was never within living memory. We relied on other means to establish credit control because the people we were really after would be unlikely to register under the Act, anyway.
Let me pick up three points from the speech of the hon. Member for Coventry, North-West (Mr. Robinson). He persisted in telling us that this legislation was being introduced in order to abolish a quango. In fact, it is not a quango. A quango is a quasi-autonomous non-governmental organisation, but the Register of Business Names is a Government organisation. The hon. Gentleman also suggested, perhaps rightly, that this abolition has come about because the Department has been told to make savings. I certainly hope so, because that is the only way in which Departments can make savings. Someone must go in and tell them how to do it. That is how business does it, and I wish the Government would do it more effectively in other areas at the present time.

Mr. Geoffrey Robinson: I am glad that we can agree on that point. Will not the hon. Gentleman also associate himself with me in asking for precise details from the Department about the savings, either net or gross, including redundancy payments and the like?

Mr. Wickenden: It is right that we should know the full facts, and I am happy to associate myself with the hon. Gentlemens comments.

Mr. Eyre: I had to reply to the Committee debate. The hon. Member for Coventry, North-West (Mr. Robinson) was not in his seat, and I therefore had to rise and make my speech. The hon. Gentleman, who was a diligent member of the Committee, raised this question then and I replied fully. If my hon. Friend looks at the report of the Committee proceedings, he will find that that information is available.

Mr. Wickenden: I am grateful to my hon. Friend. The hon. Member for Walsall, South (Mr. George) referred to the decimation of small businesses. It is worth reminding the House of something that is not brought to public attention often enough, which is that this year 76,000 new businesses have commenced—a record figure. It is high time that we gave credit for that while at the same time paying due regard to the 7,500 businesses that have failed. About 10 times as many new businesses have started this year as have failed.
The purpose of the Registration of Business Names Act registration is two-fold. It is to protect those who might grant credit to a business so that creditors may learn who are behind the business and whether they are proper people with whom they should do business. As I think I have shown, the Act has not succeeded in providing that service to creditors.
Registration is also designed to protect members of the public from unscrupulous traders of the type that are regularly exposed in the BBC "Checkpoint" programme. I suspect that that is very much the sort of business that Labour Members have in mind.
It is a sad fact of life that people who conduct their business in that sort of way are unlikely to have registered in the first place. Therefore, whatever the good intentions behind such an Act, I do not think that there is the slightest chance of an investigative journalist or anyone else

catching a dyed-in-the-wool villain because he has not paid his £2 registration fee at the Registry of Business Names.
I do not believe that the existing legislation has worked, or is likely to work, at anything like a reasonable cost. It therefore seems reasonable that it should be abolished, provided that something is put in its place to fulfil the legitimate requirements of members of the public and the credit control departments of creditor companies. It may be—I hope so—that the new proposals will work. We shall have to give them time. If they do not, we shall have to find something else. If so, we could do worse than have a look at the method operated in many of the EEC countries.
In Britain, the chambers of commerce and trade tend to be trade protection and lobby associations for trade in a given area. It is very different on the Continent. There, chambers of commerce have a statutory function that includes the registration of businesses in their own area and the supervision of those businesses. As it is done locally, it is much more effective.
If the proposals contained in this legislation are not successful or do not work as we would wish, I hope that the Government will think seriously about examining the Continental system.

Mr. Barry Porter: I add my small tribute to the memory of Graham Page, who was the Member for Crosby. I say that as secretary of the Merseyside group of Conservative Members. He was always extremely active, helpful and generous to all members of that group, in particular to those of us who shared his profession. He was a great solicitor. I shall miss him a great deal.
I would have welcomed Graham's assistance in this debate because I find myself in something of a dilemma. I have not had the opportunity to be a member of a Committee considering a Companies Bill, and having listened to some of the talk this afternoon, I am not sure whether that would be an opportunity I would necessarily welcome—certainly not if I were to be whipped by the hon. Member for Coventry, North-West (Mr. Robinson) of whom I have had experience on other Committees.
The arguments flow back and forth, and I sometimes wonder whether this type of debate is best conducted by those who served in Committee. One tends to gain an impression that the woods are occasionally lost for the trees. The debating points that are made may satisfy those who make them, but not the objective observer.
I came into the House not that long ago in the naive belief that occasionally I would attend a debate where I would weigh up the arguments, reach a conclusion and scurry into whichever Lobby I felt so inclined to enter. However, that view lasted no longer than about a minute. My hon. Friend the Member for Northwich (Mr. Goodlad) glares at me. He need have no fear, because in the dilemma in which I find myself I can reach no particular conclusion and am therefore willing to follow my leader.
I know from my professional experience that the Register of Business Names does not work; and that is the problem. It is pretty useless. I do not know how it can be said to be 60 per cent. efficient. We have no idea of how many companies fail to register. The 60 per cent. is, I hope, no more than an informed estimate. However, whether it is supposed to be 60 per cent., 40 per cent. or


50 per cent. efficient, it is still pretty useless for the reason adequately explained by my hon. Friend the Member for Dorking (Mr. Wickenden).
Why then do the CBI, the chambers of commerce and other august bodies wish to retain the register? Large organisations, other than Townsend Thorensen—which no doubt is being registered this afternoon—find a use for its research facilities and tell their Members of Parliament that it should be retained. I believe that the Financial Times was quoted earlier. Why do people get heated about the need for the information to continue to be available?

Mr. Stevens: The bureaucrats in businesses write the letters and they naturally wish to preserve the existence of their species elsewhere.

Mr. Porter: I am grateful to my hon. Friend, but that can be no more than an opinion. I doubt whether the gentlemen who wrote the letters said that they were bureaucrats and liked bureaucratic institutions.
I must take the views of those bodies into account. Serious bodies wish to have the information available. I am inclined to accept the view of my hon. Friend the Member for Dorking that the register is expensive and does not work and that we should find another method to disseminate the information that people are entitled to have. I do not know whether the Treasury has found a proper substitute. It sounds a bit hit and miss. One hopes that the unscrupulous people the legislation is aimed at will give their place of business. However, for example, some businesses operate from newsagents, where there are advertisements for Gold Leaf cigarettes or St. Bruno tobacco. Those names are all over newsagents, which are used as accommodation addresses. I do not know whether that factor has been taken into account.
I ask my hon. Friend the Minister to observe what my hon. Friend the Member for Dorking asked and keep a strict eye on what is happening, although I shall faithfully follow him into the Lobby. If people do not get the information that they require, and if the new system does not work as well as we would wish, let us not leave it for another two generations before taking action.

Mr. Michael Brown: I declare an interest. Six weeks ago a friend and I formed a small business. Among the plethora of Acts that we had to comply with was that concerning the Register of Business Names. We completed our registration and we have our certificate. Now that I have an interest in business I have been keeping an eye on the legislation that a company has to comply with. My business colleague and I read the arguments of Labour Members opposing the measure and those of my hon. Friend the Minister.
I agree with my hon. Friend the Member for Dorking (Mr. Wickenden). His company is well known and has a great reputation and it is not registered. My little company has yet to establish its business record. I do not see how the registration of my company and the non-registration of his will matter one iota to those who trade with them. 
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The register has been in existence for 65 years during which time there has been a great turnover in businesses, and now is perhaps the time to reform it. The Government in considering their budget need to examine whether the organisation is serving a useful purpose and whether money can be saved, although it must continue to protect

the general public. I see no way at present how the registration or non-registration of a company makes any difference to the public.
I now take an interest in the creditworthiness of other companies, and with my short experience of business I would not dream of using the register to make such a check. Like my hon. Friend the Member for Dorset, North (Mr. Baker), I would not go to the register to establish the creditworthiness of another firm.

Mr. Clinton Davis: If the hon. Gentleman wished to sue a business trading as a firm would he not seek to know who the partners were so that his judgment, if he could get it, would be more readily enforceable?

Mr. Brown: That would be true only if there were sanctions to ensure that every firm registered. As has been said, that is not so. The Opposition's case would be strengthened if there was greater compliance with the Act, but what sanctions could be operated for non-compliance with the Act? As a result of the honesty and integrity of my hon. Friend the Member for Dorking, shall we read in tomorrow's newspapers of a great prosecution by the Department of Trade? As long as there is a lack of knowledge of the purpose of the register or deliberate evasion by crooks, the Opposition's argument is redundant.
I readily accept that, whatever happens, the Department of Trade and Parliament must do everything that they can to bring to book the rogues and cowboys, but I do not believe that the Register of Business Names has done so in the past. As one who has just begun to check the financial standing and creditworthiness of other businesses, I am prepared seriously to consider and to welcome the proposals.

Mr. Clinton Davis: I should like to join the Minister and other hon. Members in paying tribute to a man who performed his parliamentary duties with great skill and distinction over many years, namely Graham Page. I pay that tribute not only as a colleague of his over 11 years, but as someone who worked closely with him in the all-party solicitors group in the House. The care that he felt for the profession and for the people whom he served in a variety of ways should be an example to all hon. Members. We shall miss him greatly.
I do not wish to take advantage of any emotional point. It is, however, worth noting that Graham Page cared about the law and spoke against the Government's proposals on Second Reading. He spoke forcefully and with great experience. I shall not pray his arguments in aid because there are many arguments that the Government have chosen to ignore during the debate.
The hon. Member for Bebington and Ellesmere Port (Mr. Porter) urge the Government to keep an eye on what happens. The trouble is that the Government have no intention of doing so. They do not want anything effectively to take the place of the Register of Business Names. I have always conceded that the arguments the Government have put would be valuable as a supplement to the activities of the registry. They cannot work by themselves. I do not believe that the Minister can expect a higher level of compliance with his proposals than with those already experienced.
Many hon. Members including the Minister have advanced what they call evidence about the ineffectiveness of the Act. I do not claim that there has been full


compliance. What my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) and I urge is that a pretty effective system could be coupled with the Government's proposals for reform of the present system. That cannot be achieved if the Register of Business Names is abolished.
I should like to examine some of the evidence that the Minister chose to ignore. In 1979, there were 134,561 new registrations. The figure for 1980 is 144,504. Changes registered, which amounted to 17,883 in 1979, showed a considerable increase to 23,208 in 1980. Cessations registered were 14,903 in 1979 and 19,527 in 1980. Inspections, an important statistic, amounted to 167,225 in 1979 and 201,982 in 1980. Despite difficult economic conditions, there have been 10,000 new registrations and a substantial increase in the number of inspections. This does not suggest that the system has broken down as the hon. Member for Dorking (Mr. Wickenden) who is guilty, as we know, of non-compliance with the Act and may therefore have an axe to grind, suggests. I should like to know whether the hon. Gentleman is to be prosecuted. I shall be prepared to attend court as a character witness for him. I am not sure what I would say but I would be prepared to attend. The fact is that there is substantial compliance.
Running through the debate has been the observation by Government Back Benchers, who have been briefed to say so, that the whole operation has broken down catastrophically, that it is a total waste of time, that it confers no benefits on anyone, and that it should be got rid of. The Minister does not go so far because he knows the facts. What he does is to get little bits of information here and there from people who go down certain High Streets. No doubt, as I have already remarked, he was accompanying those people in scientific tests during the Summer Recess and relies upon those findings as evidence. The Minister has, however, to balance this very unscientific approach with the figures to which I have referred—I am sure that he does not dispute them—and with the overwhelming evidence of the professional bodies and all the business experience that is accumulated in a large number of bodies including the CBI, the chambers of commerce and the trade unions, which have argued time and again that the move to abolish the register is mistaken.

Mr. Nicholas Baker: What professional body does the hon. Gentleman suggest would be capable of saying that there are so many in number or such a percentage of companies or individuals that do not comply with the Act? Is the hon. Gentleman trying to say that there is not very substantial evidence—the Minister could not give a definite answer other than that there is substantial evidence—that a large number of individuals and businesses do not comply?

Mr. Davis: I have said that. The hon. Gentleman should unplug his ears from time to time. However, the hon. Gentleman cannot gainsay the fact that the Law Society, which does listen to its members from time to time and goes to some trouble in putting forward arguments to hon. Members on a variety of topics, does not enter into the matter willy-nilly and say that it can be left to the secretary of the appropriate sub-committee to put forward his own feeble views and hope to persuade the House of Commons that this is the view of the Law Society. That is an insult to the Law Society of which the

hon. Gentleman is a member. That is not how matters work. The accumulated wisdom of all those organisations to which my hon. Friend the Member for Walsall, South (Mr. George) referred is that the Government are wrong.
I notice that the hon. Member for Hornchurch (Mr. Squire) spent his Summer Recess agonising over this matter. That is what the hon. Gentleman told the House. I am sorry that the hon. Gentleman was not able to do other things. Apart from describing his qualities as a parliamentary footballer, he revealed that he was virtually the only man who, having considered the Minister's arguments, was converted by them. That is a record. The evidence accumulated by all these bodies has impelled them to the argument—they have not deviated—that the Government are making a great mistake. The evidence should be compelling. I adopt the arguments of the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who clearly examined the evidence in detail and concluded that the Government are wrong.
From the start, the Minister has been in miserable isolation among those in the outside world interested in this subject. What happened was not a design on his part to improve consumer protection. The very reverse is true. The Minister was told that he had to make a saving on the number of civil servants. It did not matter whether they could be self-financing. It did not matter what was the nature of their jobs. He was told that he had to get rid of a number of civil servants. He therefore alighted on the proposition of getting rid of the Register of Business Names. That is the stark truth.
Everything the Minister says about trying to improve consumer protection is bogus. It would be surprising if the Government were concerned about consumer protection. One of their first actions was to get rid of the Department of Prices and Consumer Protection. The right hon. Member for Gloucester (Mrs. Oppenheim) purportedly presides over those affairs, not doing a particularly good job, although the Opposition are delighted that she has been defeated over gas showrooms, Why has the Minister not answered the argument that it would be possible to supplement the work of the Register of Business Names with the reforms that he has put before the House?
The Minister says that to do anything about the registry would involve enormous cost. There is not a scintilla of evidence to support that or to suggest what cost would be involved. The hon. Gentleman merely makes the bland, bare assertion that small business men would not be prepared to bear the cost. What evidence has he for that proposition? 
6 pm
Let us consider the Minister's own proposition, which is to abolish the register. How effectively will the Government enforce the provisions of the Bill? The Under-Secretary says that the police will be able to do it quite happily. But have the police been consulted? Do they want to undertake that additional burden on top of all their many other important duties?
The Under-Secretary mentioned trading officers, but they are employed by local authorities and the Secretary of State for the Environment is busy damaging and breaking up local authorities. The Under-Secretary wants them to bear the additional burden. What would be the cost of that? What consultations have taken place? How many more trading officers would local authorities have to


employ? Would not the burden ultimately be borne by the consumer, and to a much greater extent than the Minister is prepared to concede?
The Under-Secretary has also suggested from time to time that banks might be prepared to send people round to look at the displays advertising compliance with the Act. But who will pay for that? Will not bank customers ultimately have to pay? What will all that cost?
As my hon. Friend the Member for Coventry, North-West (Mr. Robinson) said, we should turn our minds to modernising the registry. It should not be too difficult. We could put it on a computer, arrange for more regular registration and increase the fees to £1 for a search and £5 for registration. That would not be an astronomical burden which small businesses could not bear and it is nonsensical for the Under-Secretary to suggest that that is the case.

Mr. Wickenden: If it is the case, which few would deny, that more businesses should be registered in the Register of Business Names than under the Companies Act, surely the cost of administering the register should be at least similar to that of administering the companies register, in which case the fees would have to be a great deal higher than those proposed by the hon. Gentleman—unless there were to be an unfair burden on the taxpayer.

Mr. Davis: The hon. Gentleman has not done his arithmetic. A wide variety of bodies who have looked at the matter with care—and I hope that he will acquit the Law Society, accountancy bodies, big business represented by Shell, the CBI and chambers of commerce of merely looking at the matter and pulling a figure out of the air—have all put forward a similar proposition. It is the Under-Secretary's rejection of the combined wisdom of so many who have no political axe to grind that I find so bewildering, and my view is shared by the hon. Member for Selly Oak.

Mr. Wickenden: I have done my homework. There are 2½ million companies on the Register of Business Names and 1.3 million companies in the companies registry. The cost of the Registry of Business Names must be at least equal to that of the companies registry. The cost would therefore have to be similar and a great deal more than the hon. Gentleman has suggested.

Mr. Davis: The hon. Gentleman overlooks the Under-Secretary's own argument. There is a lot of dead wood and a system of re-registration would eliminate the dead wood and constitute a saving. Obviously the hon. Gentleman did not consider that factor in his analysis of the cost.
We have gone over the arguments in great detail for many hours and I do not propose to detain the House for much longer. It is a pity that the Under-Secretary should regard himself as the TINA of the Department of Trade. There he stands—oblivious to all the arguments, uncaring about the evidence, determined to shed about 60 civil servants and to get on with the job of demonstrating his concern for the consumer.

Mr. Eyre: I know that the hon. Gentleman will remember that when he held my post the Labour Government produced a Green Paper—after an impartial examination of the circumstances that we are considering—and recommmended that the register should be abolished.

Mr. Davis: That is a proposition that officials of the Department have yearned after. I opposed it bitterly. I have told the hon. Gentleman time and again in the House, in Committee and privately that the proposition was put forward, I disapproved of it and I suggested that we should test it in a Green Paper. We tested it and we got the response that I forecast.
The proposition did not appear in the 1978 Bill, which included powers to increase the registry's fees. The Under-Secretary cannot use that argument.

Mr. Eyre: Surely the hon. Gentleman is not suggesting that the Department issued the Green Paper without having examined the subject and that it would have made that recommendation without considering all the evidence.

Mr. Davis: The Under-Secretary must know that not only Conservative Governments are concerned from time to time about reducing the number of civil servants. Such exercises, which are sometimes rather time-consuming and wasteful, also affected the deliberations of the Labour Government in 1978. The proposition was never put forward with my approval. I opposed it, and who won in the end? That is the test. What appeared in the Bill was a proposition to improve the registry. The hon. Gentleman will remember the Bill that included provisions to that effect. Ministers sometime have the last word, though that does not appear to be so in this case.
The Under-Secretary has shown that he is not prepared to see reason. That is a great pity. I gather that we shall not have another Companies Bill next year. We are all delighted about that, because the hon. Gentleman is polygamous in respect of Companies Bills. We have had one after another and I fear that we shall have another the year after next if the Government are still in office. 
The arguments have been well rehearsed and I believe that the Government are making a great error. Outside opinion is against them and will continue to be so. Once we kill the registry we shall find it difficult to maintain an edifice that will protect the consumer as well as the register is capable of doing, subject to the improvements that we can still enact. 
The Under-Secretary is not so much imposing protections for the consumer as encouraging important protections to decompose. He has failed the House by using the arguments that he has put forward. I am the hon. Gentleman's friend, but I have to say that he has not reflected great credit on himself by adopting some of the extraordinary arguments that he has been compelled to use over the many hours of debate on this issue.

Question put, That the clause be read a Second time:—

The House divided: Ayes 210, Noes 256.

Division No. 301]

[6.10 pm


AYES


Abse, Leo
Bidwell, Sydney


Adams, Allen
Booth, Rt Hon Albert


Allaun, Frank
Boothroyd, Miss Betty


Alton, David
Bottomley, Rt Hon A.(M'b'ro)


Anderson, Donald
Bradley, Tom


Archer, Rt Hon Peter
Bray, Dr Jeremy


Ashley, Rt Hon Jack
Brown, Hugh D. (Provan)


Ashton, Joe
Brown, Ronald W. (H'ckn'y S)


Atkinson, N.(H'gey,)
Buchan, Norman


Bagier, Gordon A.T.
Callaghan, Rt Hon J.


Barnett, Guy (Greenwich)
Callaghan, Jim (Midd't'n &amp; P)


Beith, A. J.
Campbell-Savours, Dale


Benn, Rt Hon Tony
Canavan, Dennis


Bennett, Andrew(St'kp't N)
Cant, R. B.




NOES


Adley, Robert
Fairgrieve, Sir Russell


Aitken, Jonathan
Faith, Mrs Sheila


Alexander, Richard
Fell, Anthony


Ancram, Michael
Fenner, Mrs Peggy


Aspinwall, Jack
Finsberg, Geoffrey


Atkins, Robert(Preston N)
Fletcher, A. (Ed'nb'gh N)


Atkinson, David (B'm'th,E)
Fletcher-Cooke, Sir Charles


Baker, Kenneth(St.M'bone)
Forman, Nigel


Baker, Nicholas (N Dorset)
Fowler, Rt Hon Norman


Banks, Robert
Fraser, Rt Hon Sir Hugh


Bendell, Vivian
Fraser, Peter (South Angus)


Bennett, Sir Frederic (T'bay)
Fry, Peter


Benyon, Thomas (A'don)
Gardiner, George (Reigate)


Benyon, W. (Buckingham)
Gardner, Edward (S Fylde)


Berry, Hon Anthony
Garel-Jones, Tristan


Biffen, Rt Hon John
Gilmour, Rt Hon Sir Ian


Biggs-Davison, Sir John
Glyn, Dr Alan


Blackburn, John
Goodhew, Victor


Blaker, Peter
Gorst, John


Body, Richard
Gow, Ian


Bonsor, Sir Nicholas
Gray, Harnish


Boscawen, Hon Robert
Greenway, Harry


Boyson, Dr Rhodes
Grieve, Percy


Braine, Sir Bernard
Griffiths, E.(B'y St. Edm'ds)


Bright, Graham
Griffiths, Peter Portsm'th N)


Brinton, Tim
Grist, Ian


Brittan, Rt. Hon, Leon
Grylls, Michael


Brooke, Hon Peter
Gummer, John Selwyn


Brotherton, Michael
Hamilton, Michael (Salisbury)


Brown, Michael(Brigg &amp; Sc'n)
Hampson, Dr Keith


Browne, John (Winchester)
Hannam, John


Bruce-Gardyne, John
Haselhurst, Alan


Bryan, Sir Paul
Havers, Rt Hon Sir Michael


Budgen, Nick
Hawkins, Paul


Bulmer, Esmond
Hayhoe, Barney


Burden, Sir Frederick
Henderson, Barry


Cadbury, Jocelyn
Heseltine, Rt Hon Michael


Carlisle, Kenneth (Lincoln)
Higgins, Rt Hon Terence L.


Carlisle, Rt Hon M. (R'c'n )
Hogg, Hon Douglas (Gr'th'm)


Channon, Rt. Hon. Paul
Holland, Philip (Carlton)


Chapman, Sydney
Hooson, Tom


Clark, Hon A. (Plym'th, S'n)
Hordern, Peter


Clark, Sir W. (Croydon S)
Howell, Rt Hon D. (G'Idf'd)


Clarke, Kenneth (Rushcliffe)
Hunt, David (Wirral)


Clegg, Sir Walter
Hunt, John (Ravensbourne)


Cockeram, Eric
Irving, Charles (Cheltenham)


Colvin, Michael
Jenkin, Rt Hon Patrick


Cope, John
Jessel, Toby


Cormack, Patrick
Johnson Smith, Geoffrey


Corrie, John
Jopling, Rt Hon Michael


Costain, Sir Albert
Kaberry, Sir Donald


Cranborne, Viscount
King, Rt Hon Tom


Critchley, Julian
Kitson, Sir Timothy


Crouch, David
Knight, Mrs Jill



Dickens, Geoffrey
Knox, David


Dorrell, Stephen
Lamont, Norman


Douglas-Hamilton, Lord J.
Lawson, Rt Hon Nigel


Dover, Denshore
Lee, John



Dunn, Robert (Dartford)
Le Marchant, Spencer


Durant, Tony
Lennox-Boyd, Hon Mark


Eden, Rt Hon Sir John
Lewis, Kenneth (Rutland)


Edwards, Rt Hon N. (P'broke)
Lloyd, Ian (Havant &amp; W'loo)


Egger, Tim
Lloyd, Peter (Fareham)


Elliott, Sir William
Loveridge, John


Eyre, Reginald
Luce, Richard

Carmichael, Neil
Kilroy-Silk, Robert


Carter-Jones, Lewis
Lamborn, Harry


Clark, Dr David (S Shields)
Lamond, James


Cocks, Rt Hon M. (B'stol S)
Leighton, Ronald


Cohen, Stanley
Lewis, Ron (Carlisle)


Coleman, Donald
Litherland, Robert


Concannon, Rt Hon J. D.
Lofthouse, Geoffrey


Conlan, Bernard
Lyon, Alexander (York)


Cook, Robin F.
Lyons, Edward (Bradf'd W)


Cowans, Harry
McCartney, Hugh


Cox, T. (W'dsw'th, Toot'g)
McDonald, Dr Oonagh


Crowther, Stan
McElhone, Frank


Cryer, Bob
McGuire, Michael (Ince)


Cunliffe, Lawrence
McKay, Allen (Penistone)


Cunningham, G. (Islington S)
McKelvey, William


Dalyell, Tam
MacKenzie, Rt Hon Gregor


Davies, Rt Hon Denzil (L'Ili)
McNamara, Kevin


Davis, Clinton (Hackney C)
McTaggart, Robert


Davis, T. (B'ham, Stechf'd)
McWilliam, John


Deakins, Eric
Magee, Bryan


Dean, Joseph (Leeds West)
Marks, Kenneth


Dewar, Donald
Marshall, D(G'gow S'ton)


Dixon, Donald
Mason, Rt Hon Roy


Dobson, Frank
Maxton, John


Dormand, Jack
Maynard, Miss Joan


Douglas, Dick
Meacher, Michael


Dubs, Alfred
Mellish, Rt Hon Robert


Duffy, A. E. P.
Mikardo, Ian


Dunnett, Jack
Miller, Dr M. S. (E Kilbride)


Dunwoody, Hon Mrs G.
Mitchell, Austin (Grimsby)


Eadie, Alex
Morris, Rt Hon A. (W'shawe)


Eastham, Ken
Morris, Rt Hon C. (O'shaw)


Ellis, R. (NE D'bysh're)
Morton, George


English, Michael
Mulley, Rt Hon Frederick


Ennals, Rt Hon David
Newens, Stanley


Evans, John (Newton)
Ogden, Eric


Ewing, Harry
O'Halloran, Michael


Field, Frank
O'Neill, Martin


Fitch, Alan
Orme, Rt Hon Stanley


Fletcher, L. R. (Ilkeston)
Palmer, Arthur


Fletcher, Ted (Darlington)
Park, George


Ford, Ben
Parker, John


Forrester, John
Pavitt, Laurie


Foster, Derek
Pendry, Tom


Foulkes, George
Penhaligon, David


Fraser, J. (Lamb'th, N'w'd)
Powell, Raymond (Ogmore)


Freeson, Rt Hon Reginald
Prescott, John


Garrett, John (Norwich S)
Price, C. (Lewisham W)


George, Bruce
Race, Reg


Gilbert, Rt Hon Dr John
Radice, Giles


Graham, Ted
Rees, Rt Hon M (Leeds S)


Grant, George (Morpeth)
Richardson, Jo


Grant, John (Islington C)
Roberts, Albert (Normanton)


Grimond, Rt Hon J.
Roberts, Allan (Bootle)


Hamilton, W. W. (C'tral Fife)
Roberts, Ernest (Hackney N)


Hardy, Peter
Roberts, Gwilym (Cannock)


Harrison, Rt Hon Walter
Robertson, George


Hart, Rt Hon Dame Judith
Robinson, G. (Coventry NW)


Hattersley, Rt Hon Roy
Rooker, J. W.


Haynes, Frank
Roper, John


Healey, Rt Hon Denis
Ross, Ernest (Dundee West)


Heffer, Eric S.
Ryman, John


Holland, S. (L'b'th, Vauxh'll)
Sandelson, Neville


Home Robertson, John
Sever, John


Homewood, William
Sheerman, Barry


Hooley, Frank
Sheldon, Rt Hon R.


Howells, Geraint
Short, Mrs Renee


Hoyle, Douglas
Silkin, Rt Hon J. (Deptford)


Huckfield, Les

Silkin, Rt Hon S. C. (Dulwich)


Hudson Davies, Gwilym E.
Silverman, Julius


Hughes, Mark (Durham)
Skinner, Dennis


Hughes, Roy (Newport)
Smith, Rt Hon J. (N Lanark)


Janner, Hon Greville
Snape, Peter


Jay, Rt Hon Douglas
Soley, Clive


John, Brynmor
Spearing, Nigel


Johnson, Walter (Derby S)
Spriggs, Leslie


Johnston, Russell (Inverness)
Steel, Rt Hon David


Jones, Rt Hon Alec (Rh'dda)
Stoddart, David


Jones, Dan (Burnley)
Stott, Roger


Kerr, Russell
Straw, Jack

Summerskill, Hon Dr Shirley
Whitlock, William


Taylor, Mrs Ann (Bolton W)
Williams, Rt Hon A.(S'sea W)


Thomas, Mike (Newcastle E)
Wilson, Gordon (Dundee E)


Thomas, Dr R.(Carmarthen)
Wilson, William (C'try SE)


Thorne, Stan (Preston South)
Winnick, David


Torney, Tom
Woodall, Alec


Urwin, Rt Hon Tom
Woolmer, Kenneth


Varley, Rt Hon Eric G.
Wright, Sheila


Wainwright, E.(Dearne V)
Young, David (Bolton E)


Walker, Rt Hon H.(D'caster)



Watkins, David
Tellers for the Ayes:


Weetch, Ken
Mr. James Hamilton and


Welsh, Michael
Mr. Frank R. White.

Lyell, Nicholas
Roberts, Wyn (Conway)


McCrindle, Robert
Rossi, Hugh


Macfarlane, Neil
Sainsbury, Hon Timothy


MacGregor, John
St. John-Stevas, Rt Hon N.


Macmillan, Rt Hon M.
Shaw, Giles (Pudsey)


McNair-Wilson, M. (N'bury)
Shaw, Michael (Scarborough)


McNair-Wilson, P. (New F'st)
Shelton, William (Streatham)


McQuarrie, Albert
Shepherd, Colin (Hereford)


Madel, David
Shepherd, Richard


Marland, Paul
Shersby, Michael


Marlow, Antony
Silvester, Fred


Marshall, Michael (Arundel)
Sims, Roger


Mates, Michael
Skeet, T. H. H.


Mather, Carol
Smith, Dudley


Maude, Rt Hon Sir Angus
Speed, Keith


Mawby, Ray
Speller, Tony


Mawhinney, Dr Brian
Spence, John


Maxwell-Hyslop, Robin
Spicer, Jim (West Dorset)


Mayhew, Patrick
Spicer, Michael (S Worcs)


Mellor, David
Squire, Robin


Miller, Hal (B'grove)
Stainton, Keith


Mills, lain (Meriden)
Stanbrook, Ivor


Moate, Roger

Stanley, John


Monro, Sir Hector
Steen, Anthony


Montgomery, Fergus
Stevens, Martin


Moore, John
Stewart, Ian (Hitchin)


Morgan, Geraint
Stewart, A.(E Renfrewshire)


Morrison, Hon C. (Devizes)
Stokes, John


Morrison, Hon P. (Chester)
Tapsell, Peter


Mudd, David
Tebbit, Rt Hon Norman


Murphy, Christopher
Temple-Morris, Peter


Myles, David
Thatcher, Rt Hon Mrs M.


Neale, Gerrard
Thomas, Rt Hon Peter


Needham, Richard
Thornton, Malcolm


Nelson, Anthony
Townend, John (Bridlington)


Newton, Tony
Townsend, Cyril D, (B'heath)


Onslow, Cranley
Trippier, David


Osborn, John
Vaughan, Dr Gerard


Page, John (Harrow, West)
Viggers, Peter


Page, Richard (SW Herts)
Waddington, David


Parkinson, Rt Hon Cecil
Wakeham, John


Parris, Matthew
Waldegrave, Hon William


Patten, Christopher (Bath)
Walker, B. (Perth)


Pattie, Geoffrey
Walker-Smith, Rt Hon Sir D.


Pawsey, James
Wall, Sir Patrick


Percival, Sir Ian
Waller, Gary


Peyton, Rt Hon John
Walters, Dennis


Pink, R. Bonner
Warren, Kenneth


Pollock, Alexander
Watson, John


Porter, Barry
Wells, John (Maidstone)


Prentice, Rt Hon Reg
Wells, Bowen


Price, Sir David (Eastleigh)
Wheeler, John


Proctor, K. Harvey
Whitelaw, Rt Hon William


Pym, Rt Hon Francis
Whitney, Raymond


Raison, Timothy
Wickenden, Keith


Rathbone, Tim
Wilkinson, John


Rees, Peter (Dover and Deal)
Williams, D.(Montgomery)


Rees-Davies, W. R.
Winterton, Nicholas


Renton, Tim
Wolfson, Mark


Rhodes James, Robert
Young, Sir George (Acton)


Rhys Williams, Sir Brandon



Rifkind, Malcolm
Tellers for the Noes:


Rippon, Rt Hon Geoffrey
Mr. Alastair Goodlad and


Roberts, M. (Cardiff NW)
Mr. Donald Thompson.

New Clause 29

CIVIL REMEDIES FOR BREACH OF SECTION 29

'Any legal proceedings brought by any person to whom section 28 of this Act applies to enforce any right arising out of a contract made in the course of a business in respect of which he was at the time the contract was made in breach of subsection (1) or (2) of section 29 of this Act shall be dismissed if the defendant to the proceedings shows—

that he has a claim against the plaintiff arising out of that contract which he has been unable to persue by reason of the plaintiff's breach of section 29(1) or (2); or
that he has suffered some financial loss in connection with the contract by reason of the plaintiff's breach of section 29(1) or (2):

unless the court before which the proceedings are brought is satisfied that it is just and equitable to permit the proceedings to continue.

This section is without prejudice to the right of any person to enforce such rights as he may have against another person in any proceedings brought by that person.'.—[Mr. Eyre.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 24

ASSIGNMENT OR RELEASE OF COMPANY'S RIGHT TO PURCHASE OWN SHARES

'.— The rights of a company under any contract approved under section 45 or 46 of this Act or any contract for a purchase authorised under section 47 of this Act shall not be capable of assignment.
Any agreement by a company to release its rights under any contract approved under section 45 or 46 of this Act shall be void unless the release is approved in advance in accordance with subsection (3) below.
The terms of the proposed release agreement must be authorised by a special resolution of the company before the company enters into the agreement; and subsections (6) to (12) of section 45 of this Act shall apply in relation to the authority for a proposed release agreement as they apply in relation to the authority for a proposed variation of an existing contract of purchase.'.—[Mr. Eyre.]

Brought up, and read the First time.

Mr. Eyre: I beg to move, That the clause be read a Second time.
New clause 24 deals with two aspects of the power of a company to purchase its own shares which would offer scope for abuse unless provision is made to prevent this.
The clause, first, in subsection (1) prohibits a company from assigning its rights under any contract of purchase authorised under clauses 45 or 47 and any contingent purchase contract authorised under clause 46. In other words, it will prevent a company from transferring any rights of purchase it acquires. If such provision were not made, a company would be able to speculate against its own share price by buying and selling rights to purchase, whether or not the share was traded on the listed or unlisted securities markets of the Stock Exchange. This is something which the Government, in introducing the power to purchase own shares, have sought to prevent. For example, it is to prevent this, as well as for other reasons, that the requirement has been made that shares must be cancelled on purchase, rather than held available for resale. Most respondents to the original Green Paper on this subject thought that this was an abuse which should not be allowed.
The second matter with which the new clause deals is that of a company agreeing to release its rights under a contract of purchase or contingent contract of purchase



authorised under clauses 45 or 46. In contrast to the assignment of rights, for which we believe there is no commercial justification and which we have therefore proposed simply to prohibit, we consider there may be good and proper commercial reasons for a company to be permitted to give up its rights of purchase. Circumstances may have changed since the contract was entered into and it may be to the advantage of the company, the shareholder who has granted the right and the other members for the purchase not to proceed. Subsection (2) accordingly allows a company to release its rights under a contract, subject to an appropriate safeguard contained in subsection (3). This safeguard is essentially that the release should be subject to approval by special resolution of the company, with the shareholder who originally agreed to sell the shares in question disqualified from voting in respect of the shares which are the subject of the contract, in the same way that the entry into a contract and any variation of it must be authorised by special resolution. This safeguard is needed because, without it, there would be an obvious means for the company to avoid the prohibition on assignments or to provide funds to a selected shareholder or group of shareholders at the expense of the others by buying a right to purchase their shares and then releasing the right.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 25

PAYMENTS APART FROM PURCHASE PRICE TO BE MADE OUT OF DISTRIBUTABLE PROFITS

C.— Any payment made by a company in consideration of—

acquiring any right with respect to the purchase of any of its own shares in pursuance of a contract approved under section 46 of this Act;
the variation of any contract approved under section 45 or 46 of this Act; or
the release of any of the company's obligations with respect to the purchase of any of its own shares under any contract approved under section 45 or 46 or under any contract for a purchase authorised under section 47 of this Act; must be made out of distributable profits of the company.

If the requirements of subsection (1) above are not satisfied in relation to any contract—

in a case within subsection (1)(a), no purchase by the company of any of its own shares in pursuance of that contract shall be lawful by virtue of this Part of this Act;
in a case within subsection (1)(b), no such purchase following the variation shall be lawful by virtue of this Part of this Act; and
in a case within subsection (1)(c), the purported release shall be void."—[Mr. Eyre.]

Brought up, and read the First time.

Mr. Eyre: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 44, 45 and 51.

Mr. Eyre: New clause 25 requires that any payment made by a company in consideration of acquiring a right to purchase its own shares, a variation of an existing contract of purchase, or in a release from any of its obligations with respect to a purchase, must be found from

distributable profits. If this requirement is not satisfied, the clause makes the related purchase of shares unlawful in the case of an option or variation and makes the release from an obligation void.
The Government recognise that it is in the interests of companies and shareholders that it should be possible for companies to acquire options to purchase their own shaes or for contracts of purchase to be varied or companies to be released from their obligations. Such facilities are consistent with the overall objective in permitting companies to purchase their own shares of promoting investment in companies, and provision is made for them, subject to appropriate procedural safeguards, in clauses 45 and 46 of the Bill. As the new clause recognises, a company may also obtain a release from an obligation arising under a contract of purchase made under the authorisation procedure for market purchases laid down in clause 47. Such contracts may not, however, be varied under Stock Exchange practice. The purchase of options on the market is excluded by the requirements imposed by clause 46.
The Bill also enables a private company to deplete capital reserves to pay the price for purchase of its own shares, subject to safeguards involving quite elaborate procedures. We see no commercial justification for allowing a company similarly to reduce its capital reserves to make a payment for an option, variation or release. The clause accordingly requires that any payments made in these circumstances may be made only from those funds which may be distributed to shareholders under part III of the 1980 Act, which safeguards the interests of creditors as regards the distribution of a company's assets.
Amendments Nos. 44, 45 and 51 are consequential on the introduction of new clause 25. The first two amendments delete provisions in clause 46 which lay down the requirements in respect of contingent purchase contracts and are now included in new clause 25.

Mr. Anthony Nelson: On Second Reading I referred to the part of the Bill dealing with the right of companies to purchase their own shares. I expressed some concern that burdensome and unnecessary restraints were being introduced on the ability of companies and shareholders to decline in size. I sought at that time to introduce a greater degree of flexibility to enable a company to purchase its own shares because the provisions in the Bill as drafted—and the same is true of the amended form—were more restrictive than I should have liked to see.
The law in this area is based on common rather than statute law, and the attitude of Parliament and commentators to companies purchasing their own shares has always been that it is rather unclean and that there is something incestuous about companies purchasing their own shares. The provisions have therefore been tightened to prevent companies from effectively exercising an important aspect of their rights; an important area of provisions that should enable money to be invested more easily and enable companies to change their shareholdings more easily. This should result in more free enterprise as companies that are redundant either decline or go out of business, which is as important as allowing new companies to spring up.
No substantial change was made in Committee. I do not press too hard for this, because I think that it is right to see


how these provisions work out, but will the Minister assure the House that if the legislation proceeds satisfactorily and if there is no abuse of the new rights that companies will have to purchase their own shares he will consider making the rules concerning purchase more flexible?
It seems that the requirements for genetral meetings and resolutions by companies are unnecessarily costly, but, most of all, the source of finance for the purchase of shares or associated rights of purchase seems to be artificially restrictive. The definition of disposable income is an accounting one because net disposable funds left with a company, if not distributed to shareholders in the form of a dividend, for example, will be reinvested as reserve in the company and so acquire the status of capital. In a subsequent year that same money, even if it is held in a deposit or current account, cannot be utilised for the purchase of shares because it is no longer classified as undistributed profit and it then becomes part of the capital reserves of the company.
I do not feel that we should have this plethora of restrictions on being able to purchase shares. I believe that a company that considers it wise to do so should be able to borrow money as much for working capital and investment requirements as for the purchase of its own shares if it considers that to be in the interests of shareholders.
I understand that creditors' interests have been of paramount consideration in the drafting of the legislation. I have made my point. I hope that the Minister can offer a gleam of hope that if the legislation is not abused, and if the number of companies buying their own shares is minimal, he will consider introducing more flexible and encouraging arrangements that the present provisions allow.

Mr. Clinton Davis: I urge the Minister to exercise caution when considering the advice of the hon. Member for Chichester (Mr. Nelson). If the hon. Gentleman had said that the legislation was unduly convoluted, I should have agreed. Having embarked on an experiment, the Minister is right to take great care. Abuses could spring to light, but they might not emerge fully for a considerable time.
The Minister should wait upon events. He should examine the position in due course although probably by then he will not be the Minister. He should try to ensure that unnecessary bureaucracy is avoided. The hon. Member for Chichester is asking the Minister to be too uncaring of the consequences that could emerge. Basically, I support the Minister's view in this matter.

Mr. Eyre: I am grateful to my hon. Friend the Member for Chichester (Mr. Nelson). I understand his desire for flexibility. I appreciate his argument that perhaps we have been too restrictive. I might be able to help my hon. Friend with some clarification.
I understand that distributable profits will be available for purchases even if they have been carried to reserves. My hon. Friend is incorrect in believing that the Bill carries them to reserves and therefore makes them unavailable for the purchase of own shares. Free reserves are available for that purpose.
I acknowledge the danger of hastening too slowly in certain circumstances. However, we have tried to strike a reasonable and proper balance. As the hon. Member for

Hackney, Central (Mr. Davis) said, in certain circumstances dangers are involved in breaking legislative ground too quickly. We have tried not to make that mistake. Nevertheless, it is reasonable to ask for a proper degree of flexibility if no improper advantage is taken of the opportunities offered under the legislation.
I hope that my hon. Friend will suspend his judgment, because when I move new clause 26 I shall set out proposals to provide for the greater flexibility that my hon. Friend believes should be made available. I ask him to bear with us in the caution with which we advance along this road, because it involves new areas of judgment and responsibility. I am sure that the provisions in new clause 26 will meet the general principles so reasonably expressed by my hon. Friend.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 26

POWER TO ALTER CERTAIN PROVISIONS WITH RESPECT TO REDEMPTION OR PURCHASE BY A COMPANY OF ITS OWN SHARES

?(1) The Secretary of State may by regulations made by statutory instrument modify the provisions of this Part of this Act with respect to any of the following matters—

the authority required for a purchase by a company of any of its own shares;
the authority required for the release by a company of its rights under any contract for the purchase of its own shares or any contract under which the company may (subject to any conditions) become entitled or obliged to purchase any of its own shares;
the information to be included in any return delivered by a company to the registrar of companies in accordance with section 48(1) of this Act;
the matters to be dealt with in the statutory declaration of the directors required by section 51 of this Act with a view to indicating their opinion of their company's ability to make a proposed payment out of capital with due regard to its financial situation and prospects; and
the contents of the auditors' report required by that section to be annexed to that declaration.
(2) The Secretary of State may also by regulations so made make such provision (including provision by way of modifying the provisions of this Part of this Act) as appears to him to be appropriate—

for wholly or partly relieving companies from the requirement under section 50(2)(a) of this Act that any available profits must be taken into account in determining the amount of the permissible capital payment for any shares under that section; or
for permitting a company's share premium account to be applied, to any extent appearing to the Secretary of State to be appropriate, in providing for the premiums payable on the redemption or purchase by the company of any of its own shares.

(3) Regulations under this section—

may make such further modifications of any provisions of this Part of this Act as appears to the Secretary of State to be reasonably necessary in consequence of any provision made by any such regulations by virtue of subsection (1) or (2) above;
may make different provision for different cases or classes of case; and
may contain such further consequential provisions, and such incidental and supplementary provisions, as the Secretary of State thinks fit.

(4) No regulations shall be made under this section unless a draft of the instrument containing the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament.'.—[Mr. Eyre.]

Brought up, and read the First time.

Mr. Eyre: I beg to move, That the clause be read a Second time.
The Government put forward the new clause in pursuance of an undertaking that I gave in Committee to consider a suggestion made by the hon. Member for Norwood (Mr. Fraser) with support from the hon. Member for Coventry, North-West (Mr. Robinson)—namely, that bearing in mind the possibility that an opportunity to revise the provisions enabling a company to purchase its own shares may not arise for some years, it would be reasonable to take a power to adapt the provisions by statutory instrument subject to affirmative resolution if, in the intervening period, it was found that they could, with advantage, be developed.
The Government have given full and careful consideration to that suggestion. Obviously, there are objections to the provision of powers to amend primary legislation by statutory instrument, and we have not overlooked them. However, there are sound considerations that we believe justify such a provision in this case. In devising the legislative provisions to permit a company to purchase its own shares, we have attempted to take account of the foreseeable positions in which the interests of shareholders and creditors will need to be protected and to provide procedures accordingly. While we have received representations, such as those discussed in Committee—my hon. Friend the Member for Chichester (Mr. Nelson) was effective there—that some changes might be desirable, we are reasonably confident at this stage that the provisions strike just about the right balance. Their present form reflects the outcome of extensive consultations during their preparation. However, we acknowledge that a power to purchase own shares is a fundamental change in company law. It is impossible to know in advance all the circumstances in which companies will exercise that power, and what will be the effects for members and creditors. We are also sensitive to the concerns that have been expressed—for example, those referred to in Committee by the hon. Member for Coventry North-West and my hon. Friend the Member for Chichester—that in some areas, such as in the way in which we have defined off-market purchases and the detailed authorisation requirements we have applied to them, we have been unduly rigorous. We therefore see considerable attractions in providing a power to adapt the purchase of own shares provisions by statutory instrument, and that, in principle, is the purpose of the new clause.
The Government have, however, been extremely careful to ensure that the proposed power goes no wider than what we consider necessary. We have, therefore, sought to set out in the clause not only those aspects of the provisions that seem to us, in the light of comments received from outside bodies and in debate in Committee, might need to be changed, but also, where possible, in what way those aspects might need to be changed. There is obviously a difficult balance to strike here. The power is intended to accommodate uncertainty, so the more precise its provisions, the less useful they might prove to be. We have done our best in the course of thorough consideration within the Government to strike a sensible balance, and I hope that hon. Members on both sides of the House accept that we have achieved that balance. We have, of course, provided for the fullest possible parliamentary scrutiny of any instrument by requiring that it be laid in draft and approved by affirmative resolution of both Houses. 

To summarise, the Government believe that the new clause enhances the potential usefulness of the purchase of own shares provisions in a sound, commonsense manner that ensures proper parliamentary accountability. We intend to exercise the power, if at all, only in the light of experience of operation of the power to purchase own shares when there is reliable evidence to justify any change. 
6.45 pm
We shall be considering a number of mainly technical amendments to clauses 43 to 57 on the subject of the purchase of own shares. The new clause effectively completes the edifice of our new provisions. Standing back from the necessary details of the statutory framework, it is appropriate to remind the House of the important and valuable objectives that will be served by those clauses. As we set out in the Green Paper last year, we envisage that the power to purchase own shares will provide additional flexibility in a wide range of circumstances—for example, where a bank or some other investor is wiling to invest equity in a company only if he can have an assurance that he will not be locked in, where an entrepreneur wishes to raise equity without giving up a proportion of the company's capital, where a major shareholder retires or dies and the stability or character of the company might be otherwise adversely affected, where a company wishes to redistribute surplus funds, and so on.
We cannot predict exactly how the provisions will be used. That is one reason for taking a power of amendment. I am sure that many companies, investors and advisers will consider how they might be used to advantage. We believe the provisions to be a major and radical advance in company law. We are heartened by the response that they have received since the Green Paper was first published. We look forward with intense interest to their application in practice.

Mr. Clinton Davis: I very much welcome the Government's response to the proposals put forward in Committee by my hon. Friends. I am grateful to the Minister for having accorded that responsibility to them and for the response that he has made. The Minister has embarked upon a useful precedent. Few hon. Members who have served in Committee on companies Bills regard them as great examples of the efficiency of parliamentary procedures. We are bogged down with an enormous welter of technical detail. Few of us, including myself, understand much of that detail when it is before the Committee. The proposal establishes a useful precedent for dealing with technical areas of legislation.
The Minister was right to stress that a draft statutory instrument should be laid before the House considers the matter. Knowing the Department of Trade, I imagine that the most careful consultation will take place with outside bodies both before the draft is prepared and after it has been published. The bodies with a professional interest in such matters have a great deal to contribute—more, I fear, than hon. Members when dealing with highly technical, non-contentious matters.
I hope that the Minister will take this opportunity to assure the bodies concerned that he will listen carefully to their representations on both the principle and the detail. I am sure that the Minister is right to say that we need a flexible approach when legislation in a narrow, technical


area is shown to be unduly burdensome. We should not have to wait for a further Bill, with all the problems of time that that poses for any Government.
I wholeheartedly welcome the proposal. It is a great advance. I am glad that the Government have taken time to put it before the House today.

Mr. Nelson: I welcome this sensible improvement to the Bill. I am grateful to my hon. Friend the Under-Secretary of State for the way in which he responded to my comments on an earlier new clause.
The drafting of the new clause appears to be of a flexible nature. It has been drafted in a way that shows that any resolution will, if anything, make the position more flexible or beneficial for companies rather than more restrictive. In other words, the resolution-making powers in the Bill appear to be designed to liberate the position rather than to tighten it at a later stage.
Normally I and, I suspect, some of my hon. Friends regard order-making and resolution-making powers within Bills as Trojan horses that are designed to keep extremely late in the House those who do not have pairs. We have not always thanked those who have been responsible for introducing order-making powers which have sometimes resulted in radical changes in legislation being introduced under the guise of a long since passed Bill. In this instance I think that the logic is accepted on both sides of the House, and I hope that the power will be used to advantage.
The provisions to allow companies to purchase their own shares have been drafted rather tightly. I suspect that far fewer companies will exercise their rights to purchase their own shares than many hon. Members on both sides of the House hope. If there is no abuse of the provisions, I think that we shall be able to use the new clause to advantage.

Mr. Eyre: I was glad to hear the approval that my hon. Friend the Member for Chichester (Mr. Nelson) gave to the clause. I much appreciate his strong interest in this area of company law. I am happy to give the assurance for which he asked.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 37

Supplementary provisions relating to Part III of the 1980 Act

(1) For the purposes of determining by reference to any particular accounts whether any proposed distribution may be made in accordance with section 43 of the 1980 Act (determination of amount of distributable profits) subsection (7) of that section (reduction of distributable profits by amount of earlier distributions) shall apply if it would not otherwise to—

any financial assistance lawfully given by a public company out of its distributable profits in any case where the assistance is required to be so given by section 40(5) of this Act;
any financial assistance lawfully given by a private company out of its distributable profits in any case where the assistance is required to be so given by section 41(2) of this Act;
any financial assistance given by any company in contravention of section 40 of this Act in any case where the giving of that assistance reduces the company's net assets or increases its net liabilities;

any payment made by any company in respect of the purchase by the company of any shares in the company except any payment lawfully made otherwise than out of distributable profits; and
any payment of a description specified in section (Payments apart from purchase price to be made out of distributable profits) of this Act;

being financial assistance given or payment made since those accounts were prepared, as if any such financial assistance or payment were a distribution already made in pursuance of a determination made by reference to those accounts.

(2) Section 44 of the 1980 Act (consequences of unlawful distributions) shall not apply in relation to—

any financial assistance given by any company in contravention of section 40 of this Act; or
any payment made by a company in respect of the redemption or purchase by the company of any shares in the company.

(3) In this section—
financial assistance" has the meaning given by section 40(6) of this Act;
net assets" has the meaning given by section 40(7) of this Act; and
net liabilities" in relation to the giving of financial assistance by any company means the amount by which the aggregate amount of the company's liabilities (within the meaning of section 40(7)(b) of this Act) exceeds the aggregate amount of its assets taking the amount of the assets and liabilities to be as stated in the company's accounting records immediately before the financial assistance is given.'.—[Mr. Peter Rees.]

Brought up, and read the First time.

The Minister for Trade: I beg to move, That the clause be read a Second time.
The new clause makes clear how part III of the 1980 Act, which is concerned with what a company may lawfully distribute, applies to payments to companies in respect of the purchase or redemption of their own shares and the giving of financial assistance for the purpose of acquisition of their own shares.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 36

DISTRIBUTIONS IN KIND

'The following section shall be inserted after section 43 of the 1980 Act—

"43A. Where a company makes a distribution of or including any non-cash asset and any part of the amount at which that asset is stated in the accounts relevant for the purposes of that distribution in accordance with section 43 of this Act represents an unrealised profit shall be treated as a realised profit—

for the purpose of determining the lawfulness of that distribution in accordance with this Part of this Act (whether before or after it takes place); and
for the purpose of the application of paragraphs 12(a) and 34(4)(b) of Schedule 8 to the 1948 Act (only realised profits to be included in or transferred to the profit and loss account) in relation to anything done with a view to or in connection with making that distribution.". '.—[Mr. Peter Rees.]

Brought up, and read the First time.

Mr. Peter Rees: I beg to move, That the clause be read a Second time.
It was appreciated that the demerger provisions that were introduced in the Finance Bill 1980 might not operate quite as they were intended to if there were not a slight relaxation of the rules on the distribution of unrealised profits. It is often an aspect of such demergers that real property, or alternatively shares in other companies of the same group, may be passed out in the course of a


demerger. The purpose of the clause is to provide that where a company distributes an asset in kind which contains an element of unrealised profit the amount of that profit shall be treated as though it were a realised profit, thereby meeting the provisions in section 39 of the Companies Act 1980, or at least not contravening it.
I venture to reflect that this is a measure of common sense and I hope that on that basis it will commmend itself to the House.

Mr. Clinton Davis: May I take this opportunity to congratulate the Minister on his transfer, or is it elevation, to the Department of Trade?

The Secretary of State for Trade: It is an elevation.

Mr. Davis: I am given that assurance by the Secretary of State, but such an assurance is always slightly dubious when it comes from that quarter. However, I am sure that it is an elevation. I wish the hon. and learned Gentleman well in the job that he will perform. He is an old friend. I look forward to crossing swords with him on many occasions, but not on this clause. I thought that he moved it brilliantly.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 28

Old public companies

"Subject to section 33(1) of this Act, any reference in this Act to a public company or to a company other than a private company shall unless the context otherwise requires be construed as including a reference to an old public company (within the meaning of section 8 of the 1980 Act) and any reference to a private company shall be construed accordingly.'.—[Mr. Peter Rees.]

Brought up, and read the First time.

Mr. Peter Rees: I beg to move, That the clause be read a Second time.

The Deputy Speaker: With this it will be convenient to take Government amendment No. 58.

Mr. Rees: I thank the hon. Member for Hackney, Central (Mr. Davis) for his extremely courteous and generous words. I am sure that he and the House will be tender of my innocence on this occasion, even if, as the hon. Gentleman forecast, we may have to cross our rhetorical swords on some other occasion. I hope that that occasion will not be presented by the clause, which is of extreme simplicity. Its purpose, together with the related amendment, is to ensure that where appropriate the Bill's provisions that are applicable to public companies and companies other than private companies apply also to old public companies in the meaning of section 8 of the Companies Act 1980.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 27

INTERNATIONAL BONDS

'.—p(1) Section 71 of the 1980 Act (exclusion of things done in connection with international bonds from prohibition on

insider dealing) shall have effect subject to the following modifications.

(2) In subsection (1)—

after the word "debenture", in the first place where it occurs, there shall be inserted the words "or any right to subscribe for, call for or make delivery of any debenture";
in paragraph (a)(ii) for the words "before the date on which it is decided" there shall be substituted the words "before the decision is taken"; and
in paragraph (b) after the word "debenture", in both places where it occurs, there shall be inserted the words "or right".
(3) The following subsection shall be inserted after subsection (1)—
"(1A) Where an individual holds unpublished price sensitive information in relation to any securities but by virtue of subsection (1) above he is not prohibited by section 68 above from doing anything in relation to those securities, he shall not be prohibited by virtue of his holding that information by section 70(2) above (prohibition on counselling persons to deal on stock exchanges outside Great Britain, etc.) from doing any other thing in relation to those securities.".
(4) In subsection (2)—

in paragraph (b) of the definition of "international bond issue" for the words "are so offered" there shall be substituted the words "are or are to be so offered"; and
the following words shall be inserted after the definition of "issue manager", that is to say, "and "off-market dealer' has the meaning given by section 70(3) above.".

(5) The following subsection shall be inserted after subsection (2)—
"(3) The Secretary of State may by regulations made by statutory instrument make provision—

permitting persons of any specified class to be treated as issue managers for the purposes of subsection (1) or (1A) (or both) of this section;
permitting persons of any specified class to be treated as off-market dealers for those purposes;
permitting an issue of international securities of any specified class to be treated as an international bond issue for those purposes;
extending the exemptions conferred by subsections (1) or (1A) above (or both) for things done in relation to other advertised securities or other advertised securities of any specified class;
amending or disapplying paragraph (i) or (ii) (or both) of subsection (1)(a) above in relation to any international bond issue or any international bond issue of a specified class.

(4) In subsection (3) above, "international securities" means any securities (whether listed or advertised or other) which are in any way connected with a country outside Great Britain, for example, securities issued by a body which is incorporated or resident outside Great Britain or which are denominated in a currency other than sterling or which are dealt in by bodies incorporated or resident outside Great Britain or by individuals so resident.
(5) Regulations under subsection (3) above—

may make different provision for different cases or classes of case and may contain such incidental and supplementary provisions as the Secretary of State thinks fit;
shall not be made unless a draft of the instrument containing them has been laid before Parliament and approved by resolution of each House of Parliament.".'.—[Mr. Peter Rees.]

Brought up, and read the First time.

Mr. Peter Rees: I beg to move, That the clause be read a Second time.
This is a clause of greater complexity than the previous one, but I think that it can be put fairly simply. It is designed to relax to a small degree the provisions relating to insider dealing, as these might otherwise have had an effect on the market in international bonds. Part of the clause is designed to put right certain defects in section 71


of the 1980 Act, which provides a defence to a charge of insider dealing for certain operations of the international bond market. The rest of the clause gives the Secretary of State power to amend that section by order in certain respects.
The rationale underlying the clause is that the international bond market is essentially for professionals. If the regulations are drawn too tightly in respect of dealings on that market there is a substantial risk that the market will be driven overseas, to the detriment, as I put it to the House, of Britain. As it is essentially a professional market for professionals, there is not quite the same need for the protection of the unwary and inexperienced as that which is contained in section 71.
The international bond market has, of course, many international dimensions and its character alters rapidly. The possibility of the Secretary of State being able to introduce the necessary primary ligislation to make appropriate amendments year by year is remote. I feel that the House would be rather irked if a fresh Companies Bill were introduced every year purely to make the necessary amendments to the provisions relating to the international bond market.
I hope that the House will feel that in this instance it is appropriate for the Secretary of State to have power by regulation, which will be subject to the affirmative resolution procedure, to amend as he thinks proper, after due scrutiny by the House, the provisions relating to this rather specialised market.

7 pm

Mr. Clinton Davis: If I am critical of the Government, I am in no way being critical of the Minister of State who bears no responsibility for the observations that I want to make.
We have many lessons to learn from the way in which we conduct our company legislation in the House. Part of the problem may be cured by the device of which we spoke in our discussions this evening.
I wish that the defects of the 1980 Act were confined to section 71. The trouble with the 1980 Act—to some extent like the Bill—is that it is legislation by second thoughts. The Government did not order their thoughts on the 1980 Act, and they have not done so for the Bill. In both cases they decided to limit the legislation. They then found that they could not do that because the long title of the Bill did not permit them to do so.
The Government changed their minds about the 1980 Bill, and by the time they did so the only ay in which any progress could be made was to get the parliamentary draftsman to work overnight on a defective brief because the time scale was against him. A massive number of new clauses were introduced in Committee—the hon. Member for Kensington (Sir B. Rhys Williams) and I were both on that Committee—in a way that did not enable the Committee to make any reasonable scrutiny of what was placed before it. On Report a number of new clauses were introduced, but there was little or no opportunity to consult about them. That cannot be a sensible way to conduct company legislation.
One would have thought that the Government would have learnt something from the experiences of last year, but evidently they have not. Unfortunately, we are today faced with a large number of new amendments and clauses and there has not been sufficient time in which to engage in effective and proper consultation.

This procedure is one on which we should not embark too quickly again in the near future. That applies not only to company legislation, but to all technical legislation. The House of Commons must devise a better way to deal with these matters. We have a new procedure, but I do not believe that it is more than experimental. I am not satisfied that it satisfactorily covers the scrutiny that we need to undertake when we consider matters such as the one in new clause 27, which is highly complex. I have consulted no one about it. I do not know what defects it contains, but I wish that the defects highlighted by the Government on this occasion represented the end of the matter.
Accountancy bodies have represented their extreme concern about other aspects of the 1980 Act. It is a pity that we are to be denied an opportunity to put them right. It would be better if we could put right those aspects by employing the procedures that were outlined by my hon. Friend the Member for Norwood (Mr. Fraser), the principles of which were accepted by the Government in a recent debate.
The Government must now consider carefully the much more extended use of the statutory instrument procedure, subject to the safeguards that we have outlined. They should not come forward at the last moment with substantial changes in the legislative proposals as compared with what was before the Committee. Having said that, I do not object to the principle underlying the new clause. I shall not recommend my right hon. and hon. Friends to vote against it.

Sir Brandon Rhys Williams: I believe that this is the appropriate stage on Report for me to make some serious remarks about which I have already warned Mr. Speaker.
It is proper to draw attention to the way in which the Department is handling company law, particularly in this Bill, although in earlier Bills as well. By my reckoning, when the Bill was first introduced to the Lords it had 109 pages and 62 clauses. When it came from the Lords, it had 131 pages and 79 clauses, many of which were extremely difficult and technical. However, they are not only important to a handful of people, but they make significant differences to the way in which many companies are run.
When the Bill emerged from Standing Committee, it had 165 pages and 106 clauses, many of which included entirely new matter which was not in the Bill on Second Reading in the House. Now on Report there are a considerable number of new Government clauses to be taken, some, like this one, of considerable complexity. There are at least 150 new Government amendments. That is not in accordance with the long-established procedures of the House. Someone should reprimand the Department for slipping into this way of conducting its business.
I am particularly disquieted because, knowing what we do about the way the Department plans to reform company law, we hear that there is unlikely to be another Companies Bill in this Parliament. But Clause 103, which is to cover amendments of the Companies Act, seems to give virtually carte blanche to the Department to amend company law in any way it likes and to put its amendments before the House to be rubber-stamped without discussion. That is a wrong approach. Many people are involved. Company law is a difficult matter, but it is a matter of wide application, not to be considered as purely a departmental concern.
I wish to raise another matter because I believe it to be germane. That is the question of the selection of hon.



Members for the Committee on the Bill, and probably for other Bills as well. The House knows that I have a particular interest in company law. I have introduced either a new Bill or a significant measure of reform for company law in every Session of the House since 1969. Company law is also very much a constituency interest for a large number of people in my division. I spoke on Second Reading and was looking forward to taking part in the Committee as I had taken part in the Committees on earlier Bills.

Mr. Deputy Speaker: The hon. Gentleman is now addressing himself to a matter that relates to the Committee of Selection. We are discussing a new clause in which the Committee of Selection is not mentioned.

Sir Brandon Rhys Williams: I entirely accept that. I took the precaution of consulting Mr. Speaker on this question before I raised it. If you will allow me to complete my remarks, Mr. Deputy Speaker, I think that you will see that they are germane to our consideration of the matter which the Minister has brought up for the first time in this new clause.
This matter could have appeared in the Bill on Second Reading and should have been included during the Committee stage because it is of sufficient interest and importance to have merited the discussions that such matters can have in Committee. In considering whether it should approve new clause 27, the House should take note that many of the clauses were not dealt with as completely as they might have been in Committee; and this is now a Committee point which is being brought up on Report. If I am not allowed to make these remarks now, I must seek your guidance on the appropriate time to do so, Mr. Deputy Speaker. Mr. Speaker's guidance was that it would be proper to raise the matter now. Therefore, I hope that you will allow me to continue, Mr. Deputy Speaker.
I understand that the policy of the Committee of Selection now is to ensure that on the Government side all the hon. Members appointed to the Committee are Members who have undertaken to support the Government on every clause. I was asked whether I would give such an undertaking if I were nominated to the Standing Committee. I was unable to give that assurance, because I do not think it would have been a proper assurance for any hon. Member to give, therefore I was not able to serve on the Standing Committee.

Sir Albert Costain: On a point of order, Mr. Deputy Speaker. I intervene as a member of the Committee of Selection. Is the House to be told by hon. Members about things that the Selection Committee is alleged to have done? I can assure my hon. Friend that such matters as he has raised are not taken into account.

Mr. Deputy Speaker: I have served on the Committee of Selection and am aware of the procedure. I think that the hon. Member for Kensington (Sir B. Rhys Williams) is now off that point. Perhaps, if he will remain off it, we can proceed with the business.

Sir Brandon Rhys Williams: Since I have been challenged, perhaps I might be allowed to conclude this section of my remarks by saying that I consulted the Chairman of the Committee at the time and he assured me what his policy was as Chairman. I spoke to him today and

he repeated it. I warned him that I was intending to raise the matter in the House today. If I have misunderstood him, I hope that he will correct the matter in the House, because I would not want the House to be under any misapprehension.

Mr. Clinton Davis: I make no reflection on the Committee of Selection, but I very much missed the independence of judgment that the hon. Member for Kensington (Sir B. Rhys Williams) has displayed on other Bills on which I have had the privilege of serving with him. I missed the expertise which he has clearly had to offer in respect of company legislation. What he has divulged to the House is not a reflection on the Committee of Selection but is a grave reflection upon the Government Whips.

Sir Brandon Rhys Williams: I do not want to apportion blame. I do not know that it is a blameworthy matter. Other hon. Members might think that it is perfectly proper. But the constitutional issue which arises in the consideration of the amendment—if it is proper that the House should take it in this way at this time—is whether the Committee should be constituted in such a way that the Government Members are Members who are prepared to give an undertaking to support the Government on every clause. If that is the way in which selections are made, hon. Members should bear in mind when the Bill comes back to the House on Report that a constitutional change is taking place, since this is the way in which the Committee of Selection, as I am assured, now deals with the question of selection of hon. Members to serve on the Government side.

Mr. Nicholas Baker: My hon. Friend seemed to suggest that an undertaking was required of Conservative members of the Committee on the Companies Bill that they would support Government policy. That was certainly not my experience. No undertaking was required of me.

Sir Brandon Rhys Williams: I was asked to give that assurance and, because I was not able to do so, I was not nominated to the Committee. Possibly the Committee stage was all the better because I was not a member of the Committee—that is a matter for the other hon. Members to consider—but it is right to draw attention to the fact that this constitutional change has taken place, and that the Department, particularly with reference to company law, is treating the House, as it seems to me, with contempt. I hope that the Chair, as the protector of minorities in this House, will take note of the position and reflect upon it, even if Mr. Speaker may not feel willing or ready to intervene in any way. I hope that—

Mr. Deputy Speaker: Order. As there have been several references to Mr. Speaker, perhaps I may say that I have no doubt that he will read this part of the Official Report with considerable care. I hope that the hon. Member will now move on.

Sir Brandon Rhys Williams: I hope, too, that an opportunity will be given to members of the Committee of Selection and the Chairman of the Committee to comment fully on what I have said, and that the whole matter may be resolved in the open. I would prefer that, and I think that all hon. Members would like to have some reassurance on this point.

Mr. Neville Trotter: Like my hon. Friend the Member for Dorset, North (Mr. Baker), I was not asked to give any such assurance. It may be that my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who is raising the issue, has a record of being against the Government on a number of matters. Perhaps it was for that reason that he was approached. But I do not believe that it was general with the members of the Committee, and it certainly did not happen in my case.

Mr. Deputy Speaker: I appeal once again to the hon. Member for Kensington to come back to the new clause.

Sir Brandon Rhys Williams: I do not want to say more about the new clause. As far as I am able to understand it——

Mr. Clinton Davis: Again I make no aspersions against the Committee of Selection, but the Government Whips knew who the "chocolate soldiers" were and that they could expect total compliance from them. I said that at the beginning of our debate. I was right and the hon. Member for Kensington is right.

Sir Brandon Rhys Williams: I think that the right thing for me to do, Mr. Deputy Speaker, is to obey your injunction and to draw my remarks to a close. I have not had the opportunity of looking at new clause 27 in the way in which it would have been looked at in Standing Committee, but I do not think that it would be right for me to dwell further on its merits and demerits. As far as I am able to judge, it is an admirable proposal, but it is one which ought not to have been introduced to the House in this way.
I hope that my protest will serve a useful purpose, and I am grateful to you for your forbearance, Mr. Deputy Speaker, in allowing me to make it.

Mr. Peter Rees: I intervene with some diffidence, for the hon. Member for Hackney, Central (Mr. Davis) and my hon. Friend the Member for Kensington (Sir B. Rhys Williams) have not directed much fire at the new clause. However, I should like to deal briefly with some of the general points which have been made.
The hon. Member for Hackney, Central said, in charming and epigrammatic phrase, that this was Government by second thoughts. But he, with his long experience of the Department and his long experience of company law—very much longer than my own—knows that this is a rapidly developing field, where the Government of the day—I am sure that it was as true of the Government of which he was a distinguished ornament—are subject to a great deal of outside pressure and representation, and very rightly so. As my hon. Friend the Member for Kensington well knows, it is a complex field which affects a wide range of interests and is of practical significance. Therefore it is right that the Government of the day should be sensitive to the points made to them.
In an ideal world, it would be right for every clause and major provision to be there for the House to see nd debate on Second Reading, before the Bill goes to a Committee. But my hon. Friend the member for Kensington, who has been in the House longer than I have, knows that we do not live in an ideal world. That is certainly the case with Finance Bills, on which I have had to labour for far too long. Unless the House is to be overloaded with primary

legislation Session by Session—and I do not think that that is the wish of the House as a whole—it is right that the Government of the day, of whatever party, should take an appropriate opportunity to fit in new measures.
The provision has, of course, fairly far-reaching effects, but it is primarily in relation to section 71 of the 1980 Act, so that it is not a new conception that has sprung from the forehead of my right hon. Friend the Secretary of State for Trade. It is the development of a series of provisions that were introduced in the 1980 Act.
I hope, therefore, on that basis—although I recognise that it is desirable that the House should have the maximum opportunity to scrutinise these provisions on the Floor of the House and in Committee—that the House will accept the clause, particularly since no substantial criticism has been levelled at its substance.
It would be quite inappropriate for me to come between my hon. Friend the Member for Kensington and the Committee of Selection, and I therefore pass over that matter. I am genuinely sorry, as I always listen with keen interest to the interventions of my hon. Friend in many fields—particularly that of company law—that the Standing Committee was deprived of his services, for whatever reason. But a virtue of the Report stage is that it gives hon. Members who did not have a chance to contribute to the proceedings in Standing Committee the opportunities to bring their considerable experience to our debate. That is perhaps its justification for our debate here this evening.
I hope that, notwithstanding the reservations about procedure to which I shall of course make a point of drawing the attention of my right hon. Friend the Leader of the House, the substance of the new clause has been thoroughly examined and will commend itself to the House.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 30

PRIVILEGED INFORMATION

(1) The following paragraph shall be substituted for paragraph (a) of section 175 of the 1948 Act (saving for disclosure of information by solicitors)—

"(a) by any person of any information which he would in an action in the High Court, or in Scotland, the Court of Session be entitled to refuse to disclose on grounds of legal professional privilege except, if he is a lawyer, the name and address of his client;"

(2) In section 446 of the 1948 Act (saving for disclosure of privileged information in criminal proceedings) for the words from "nothing in this Act" to the end there shall be substituted the words "or the Secretary of State, nothing in this Act shall be taken to require any person to disclose any information which he is entitled to refuse to disclose on grounds of legal professional privilege".

(3) In section 116(1) of the 1967 Act (saving for disclosure of information by solicitors) for the words "the production by a solicitor of a document containing a privileged communication made by or to him in that capicity" there shall be substituted the words "the production by any person of a document which he would in an action in the High Court or, in Scotland, the Court of Session be entitled to refuse to produce on grounds of legal professional privilege".—[Mr. Eyre.]

Brought up, and read the First time.

Mr. Eyre: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 140 and 151.

Mr. Eyre: New clause 30 deals with the complex question of legal professional privilege as it applies to investigations under the Companies Acts and to proceedings brought under the 1948 Act. Under the present legislation there are provisions in the 1948 and 1967 Acts with a bearing on this question. Under section 175 of the 1948 Act disclosure is not required by a solicitor to the Secretary of State or an inspector of any privileged communication made to him in that capacity except as regards the name and address of his client. Under section 446 of that Act, where proceedings are instituted under the Act by the Director of Public Prosecutions or by or behalf of the Lord Advocate, nothing in the Act is to be taken to require any person who has acted as a solicitor for the defendant to disclose any privileged communication made to him in that capacity. Finally, under section 116 of the 1967 Act, as amended, nothing in part III of that Act, which is concerned with inspection of a company's books and papers, shall compel the production by a solicitor of a document containing a privileged communication made by or to him in that capacity or authorise the taking of possession of any such document which is in his possession.
Paragraphs 8 and 32 of schedule 3 to the Bill, which the new clause supersedes, would have extended these provisions to counsel.
The Law Society argues that the privilege should extend not only to communications in the hands of a solicitor, or under schedule 3, in the hands of counsel, but also such communications when in the hands of a client. We agree.
As the House will understand, the legal professional privilege with which the Acts are concerned is the privilege of the client and not of his legal representative. We feel that there is a need to remedy an uncertainty in the present law as to whether, if a person waives privilege, inspectors may obtain documents in relation to which privilege lay from that person's lawyer. There is also a need to include a minor amendment to section 446 to bring it into line with the amendment to section 334(5) proposed in clause 86(2) of the Bill which refers to prosecutions instituted by the Secretary of State.
Subsection (1) of the new clause will amend section 175 of the 1948 Act to the extent that a person, whether a lawyer or not, shall not be required to disclose any information which he would in an action in the High Court or, in Scotland, the Court of Session, be entitled to refuse to disclose on grounds of legal professional privilege except, if he is a lawyer, the name and address of his client. This meets the suggestion of the Law Society to which I have referred and also clarifies the question of waiver of privilege inasmuch if privilege is waived by the client in the High Court or Court of Session documents can then be obtained from his lawyer.
Similarly, under subsection (2), nothing in the Act is to be taken to require any person to disclose in proceedings instituted under the 1948 Act any information which he is entitled to refuse to disclose on grounds of legal professional privilege. The proceedings referred to include those brought by the Secretary of State as well as those

brought by the Director of Public Prosecutions and Lord Advocate, so bringing section 446 into line with section 334(5) as proposed to be amended by clause 86(2).
Subsection (3) amends section 116 of the 1967 Act in a similar manner to the amendment to section 175 of the 1948 Act, proposed in subsection (1), subject to the inherent difference in the investigation procedures under the relevant sections of the 1948 and 1967 Acts. Investigations to which section 116 of the 1967 Act apply require as a first step that documents be produced, whereas sections 175 and 446 of the 1948 Act contemplate oral evidence being given without the necessity for any initial production of documents.
I should add that amendments Nos. 140 and 151 are merely consequential.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 34

TEMPORARY EXTENSION OF POWER TO REQUIRE COMPANY TO CHANGE ITS NAME

'(1) In relation to any company which was first registered, or registered by a new name, at any time during the period beginning with 18th March 1981 and ending with 23rd August 1981 section 18(2) of the 1948 Act (power of Secretary of State to direct company registered by name too like an existing company's name to change its name) shall have effect as if for the words "within six months of its being registered by that name" these were substituted words "before 24th February 1982".

(2) Where in the case of any oversea company the relevant date within the meaning of section 31(2) of the 1976 Act (date of delivery of certain documents on the company's first establishing a place of business in Great Britain or date of return as to change in the company's corporate name) falls within the period mentioned in subsection (1) above, section 31(2) (which restricts the power of the Secretary of State to serve a notice under subsection (1) of that section in effect requiring an oversea company to use a name other than its corporate name for carrying on business in Great Britain) shall have effect in relation to that company as if for the words from "six months" (in the first place where they occur) to "this section" (in the second place where they occur) there were substituted the words "23rd February 1982".

(3) This section applies in relation to any such company as is mentioned in subsection (1) or (2) above notwithstanding the fact that the period of six months mentioned in section 18(2) or (as the case may be) in section 31(2) has expired in the case of that company before this section comes into operation.

(4) In this section "oversea company" has the meaning given by section 406 of the 1948 Act.'.—[Mr. Eyre.]

Brought up, and read the First time.

Mr. Eyre: I beg to move, That the clause be read a second time.
Before dealing formally with this and the subsequent clause I should say that these clauses deal with an attempt to alleviate the difficulties of the Civil Service industrial action.
I am pleased to be able to inform the House that the backlog of work at the companies registration offices in both Cardiff and London arising from the recent industrial action in the Civil Service has now been cleared and the normal microfiche search service has been reinstituted.
Additionally, the registrar is now making available for free inspection in the public search rooms a directory of companies in microfilm form which will give certain basic details for each registered company, such as its registered office address and the made-up date of the last annual


return and accounts received by the registrar. This should assist searchers to obtain certain key information more easily than at present.
I turn to new clause 34. One of the results of the recent industrial action within the Civil Service was that the index of company names was not updated by the Registrar of Companies between 18 March and 23 August 1981 inclusive and was therefore not available for inspection by members of the public. This index is the present non-statutory version of the index which will be required to be kept under clause 23.
In practice, many companies maintain a close watch over the content of the index and if a new name appears which they feel is "too like" their own they will lodge an objection with a request that the Department exercises its power under section 18(2) of the Companies Act 1948 by issuing a direction against the newly registered company to change its name within six months of the date of its registration. In respect of names registered during the absence of the index, objecting companies may subsequently have, or have had, only a restricted time in which to examine the index and lodge their objections before expiry of the six-month period. We have received representations about this and consider that the absence of the index caused by industrial action may have resulted in companies being registered by names which are "too like" those of existing companies and that, in the circumstances, we are justified in extending the period in which a direction under section 18(2) may be given in respect of names registered in that period.
We propose, therefore, that in relation to company names registered on any day between 18 March and 23 August 1981, that being the period during which an up-to-date index was not available to the public, the power to direct a change under section 18(2) should be extended for a further six months until 23 February 1982. This will allow a full six month period after an up-dated index became available in which to consider whether the name by which a company was registered during that period is "too like" that by which another company was already registered. 
7.30 pm
A similar problem, of course, arises in relation to the corporate names of overseas companies which registered under part X of the 1948 Act or changed their names during the period in which an up-to-date index was not available. Subsection (2) of the new clause will enable the Secretary of State to take appropriate immediate action under section 31 of the 1976 Act for a period of six months after the updated index became available.

Mr. John Fraser: The Minister said that many companies keep a close watch on the index to see whether a company is registered with a name similar to their own. That simply is not true of the majority of British companies. They have better things to do than to search the register of names every six months or so. Therefore, what the Minister said must apply only to companies that are rich, large or well known and have that sort of facility. Most businesses have far too much to do. They must cope with the recession, high interest rates and other matters. Besides manufacturing a product, they have far too much to occupy their time without having to go to the trouble of searching the register.
The Minister also said that many companies closely watch the register. That is demonstrably not so. But what 

he said perhaps indicates the inadequacy of the new system, whereby the company must keep a watch on the index rather than on the registrar.
Let me suggest something that could be done on a non-statutory basis. As the Under-Secretary explained, during the period of the Civil Service industrial action the register was not available for inspection. Therefore, if it comes to the registrar's attention that two names are very alike I hope that he will voluntarily draw the attention of the first registered company to the similar name in case that company wishes to make an objection. Britain's manufacturers and producers of services have better things to do than constantly to inspect the register.

Mr. Eyre: I am sure that the hon. Gentleman appreciates that the Registrar of Companies could not enter into an obligation to act in the way that he has requested. I am sure also that if the registrar had knowledge of what the hon. Gentleman has described he would be willing to notify another company.
I have always found the registrar to be most helpful in making the system work. I hope that we can leave the matter there. As the hon. Gentleman knows, there will be an updated index. That will be of great help to companies. It will be available and updated regularly, and it will enable a check to be made on the likely names of companies that might become too similar to that of a registered company. It will assist companies to look after their own rights in this respect.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 35

CONVERSION OF CREDITORS' VOLUNTARY WINDING UP TO MEMBERS' VOLUNTARY WINDING UP IN CERTAIN CIRCUMSTANCES

(1) Subject to the following provisions of this section, where a company is being or has been wound up voluntarily and—

the winding up is or was a creditors' winding up; and
a statutory declaration which satisfies the requirements of subsection (2) below is delivered to the registrar of companies;

from the date on which that declaration is so delivered referred to below in this section as the conversion date) the winding up shall be treated for all purposes of the 1948 Act as if it were or (in the case of one already concluded before that date) as if it had been a members' voluntary winding up and (in the case of any such winding up, whether concluded before or still in progress at that date) as if it had been a members' voluntary winding up at all times since its commencement.

(2) A statutory declaration made for the purposes of this section must be made by the directors of the company or, in the case of a company having more than two directors, by the majority of the directors, and must state—

that a statutory declaration complying with the requirements of subsections (1) and (2)(b) of section 283 of the 1948 Act (statutory declaration of solvency in case of proposal to wind up voluntarily) was made by the directors (or by the majority of the directors) of the company in accordance with subsection (1) of that section within the five weeks immediately preceding the date of the passing of the resolution for winding up the company (as required by subsection (2)(a) of that section);
that it was properly addressed to the registrar of companies, pre-paid and posted on a date within the period beginning with 7th April 1981 and ending with 1st August 1981; and
that a letter so addressed and posted would in the ordinary course of post have been delivered to the registrar of companies before the date of the passing of the resolution for winding up the company.

(3) For the purposes of sections 283(3) and 288 of the 1948 Act (consequences of actual or prospective failure to pay debts in full within the period stated by the directors in the declaration of solvency) the period specified in the declaration under section 283 of that Act in the case of a winding up to which subsection (1) above applies shall be taken to have been twelve months from the commencement of the winding up unless the contrary is shown.

(4) Nothing in this section shall affect the validity of anything validly done in a winding up to which subsection (1) above applies before the conversion date.'.—[Mr. Eyre.]

Brought up, and read the First time.

Mr. Eyre: I beg to move, That the clause be read a Second time.
As with the previous new clause, the purpose of this clause is to permit some alleviation of the particular difficulties experienced by a number of companies as a result of the recent Civil Service pay dispute. I hope that the House will bear with me while I explain that, under current legislation, section 283 of the Companies Act 1948 provides that before a voluntary liquidation may be carried on as a members' voluntary winding up the directors must make a statutory declaration of solvency to the effect that they have carried out a full inquiry into the company's affairs and have formed the opinion that the company will be able to discharge its debts fully within a period not exceeding 12 months from the commencement of the winding up.
The Act further provides, in section 283(2), that the declaration shall not be effective unless it is made within the five weeks immediately preceding the date of the passing of the resolution for winding up the company and is delivered to the Registrar of Companies for registration before that date.
If the declaration of solvency is not made and delivered within these time limits, section 283(4) provides that the liquidation must be carried on as a creditors' voluntary winding up. Although the provisions of section 283 of the 1948 Act are to be amended by clause 96 in order to provide more flexibility concerning the delivery of the declaration of solvency, that clause will apply only to liquidations commenced after the appointed day.
The purpose of the clause, therefore, is to enable companies that proposed to be wound up by members' voluntary liquidation but were affected by delayed deliveries of post during industrial action between April and August this year to be so wound up and to validate actions taken on the basis that they were members' voluntary liquidations, provided that the directors deliver to the Registrar of Companies a statutory declaration that they fulfilled all the requirements of section 283 of the 1948 Act except delivery within the prescribed period.
A creditors' voluntary winding-up is much more onerous administratively and more costly for a company than a members' voluntary winding-up. It involves the calling of meetings of creditors and advertising in the London or Edinburgh Gazettes and local newspapers. In circumstances where companies have gone through all the proper procedures to achieve a members' voluntary winding up, and have failed to comply with the strict requirements of the Act only because of delayed deliveries of post caused by the industrial action to which I have referred, it would clearly be desirable that they should 

avoid this inconvenience and expense. Although only a few companies are affected, I hope that the House will support this proposal.

Mr. Trotter: I ought to declare an interest. I am the liquidator for some of the companies involved. I welcome the new clause, because there has been considerable difficulty for those companies that were unfortunate enough to fall foul of this administrative problem.
The companies with which I am involved are subsidiaries of a public company. Owing to a restructuring of the group, they are no longer needed as trading entities. The management decided that they could sensibly be put into liquidation and removed from the scene. There is no question of insolvency but, for the reason outlined by my hon. Friend, the declaration of solvency was not acted upon in these cases, and without the passing of the new clause they are technically to be treated as insolvent. That would not only give rise to delay and cost, but could lead to the stigma of insolvency. Those who see these things in the London Gazette might say "Ah, those companies are insolvent". Some people might know the parent company, and an unfortunate impression might be given as a result of circumstances beyond the control of myself as liquidator, the companies themselves or the management of the parent company.
I am sure that there are many such cases throughout the country. I drew my hon. Friend's attention to my situation, and I put on record my thanks to him for the way in which he has been able to find a solution to the problem.
What steps can be taken to publish as widely as possible and as soon as possible in the accounting press the effect of the clause? Many other accountants may be going through the laborious and costly procedure with their liquidators of converting their companies into insolvent companies. Perhaps there could be a press release from the Department so that unnecessary delays and costs are not incurred by other liquidators.

Mr. Eyre: I thank my hon. Friend the Member for Tynemouth (Mr. Trotter) for his remarks. I appreciate the fact that he alerted my office to the difficulties and gave us an opportunity to prepare some measure of alleviation.
My hon. Friend asks me to take all steps possible to publish the good news. The registrar will be writing to all the companies concerned, which I hope will be most helpful. We are also always grateful to the press, and particularly to City journalists who write on such matters. It is important to get over to people that the measure is available to ease them out of a particularly difficult situation. We shall appreciate any coverage resulting from my hon. Friend's intervention.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 23

REGISTER OF PAST DIRECTORSHIPS

'.—(1) Section 200 of the 1948 Act (register of directors and secretaries) shall have effect subject to the following modifications.

(2) In subsection (2)—

in paragraph (a) (particulars of directorships to be kept on the register) after the words "particulars of any other directorships held by him" there shall be inserted the words "or which have been held by him";
in the proviso (particulars not required to be kept on register) for all the words preceding the words "and for the purposes of" there shall be substituted the words—

"Provided that it shall not be necessary for the register to contain on any day particulars of any directorship—

which has not been held by a director at any time during the five years preceding that day;
which is held by a director in any company which—

is dormant or, in relation to the company keeping the register, is a relevant company; and
if he also held that directorship for any period during the five years immediately preceding that day, was for the whole of that period either dormant or such a relevant company;
(c) which was held by a director for any period during the five years preceding that day in a company which for the whole of that period was either dormant or, in relation to the company keeping the register, a relevant company;";
and at the end of that subsection there shall be added the words "and
a company shall be treated as being or as having been dormant during any period during which no transaction occurs which is or was a significant accounting transaction (within the meaning of section 12(6) of the Companies Act 1981) for that company; and
(iv) a company shall be treated as being or as having been at any time a relevant company in relation to any other company if at that time it is or was a company of which that other company is or was a wholly owned subsidiary or if it is or was a wholly owned subsidiary of that other company or of another company of which that other company is or was a wholly owned subsidiary.".

(3) The following subsection shall be substituted for subsection (7)—

"(7) If any inspection required under this section is refused or if default is made in complying with subsection (1), (2), (3) or (4) of this section, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding the statutory maximum or on conviction after continued contravention to a default fine not exceeding one-tenth of the statutory maximum.".

This subsection shall not have effect in relation to any offence committed before the appointed day.

(4) Subsection (4) of section 200 (notification to registrar of changes in register) shall not apply in relation to any change in the particulars contained in a company's register of directors and secretaries made solely by reason of the coming into force of subsection (2) above but if, after any such change has occurred and before the company makes its next annual return, any other change in those particulars occurs, the company shall send to the registrar a notification in the prescribed form of any such earlier changes and the date on which they occured at the same time as it notifies the registrar of the later changes in accordance with section 200(4).'.—[Mr. Eyre.]

Brought up, and read the First time.

Mr. Eyre: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take the following:
New clause 4—Disclosure of former directorships.
New clause 17—Duty of court to consider disqualification of directors.
New clause 18—Disqualification of directors etc.
New clause 19—Duty to consider disqualification.
New clause 33—Prohibition on directors of insolvent companies from acting as liquidators, etc.
Government amendments Nos. 1, 110, 114, 139, 146 and 166.

Mr. Eyre: One of the most important issues which we discussed in Committee concerned the effectiveness of the

powers to disqualify persons from managing companies. As a result, we have looked carefully at the provisions concerned and brought forward a number of amendments, of which new clause 23 on the disclosure of past directorships is one. We are thus also proposing further improvements to clause 87 on the disqualification of directors and a tightening up of section 187 of the Companies Act 1948 on the disqualification of undischarged bankrupts. The Opposition have proposed a measure to improve the effectiveness of section 9 of the Insolvency Act 1976.
However, we continue to hold the view that clause 87, taken with these other measures, will constitute an effective reform of the power to disqualify. It will permit magistrates' courts to disqualify for up to five years a person convicted of an indictable offence in connection with the promotion, formation, management, receivership or liquidation of the company or who has been in default at least three times in making returns to the registrar. These changes will improve the effectiveness of the Department and the police, since they will avoid the need for the present time-consuming and costly procedures involving application to courts of higher jurisdiction. The deterrent effect of disqualification will also be improved, partly by widening the coverage of the disqualification order—it will include all stages of involvement in the life of a company—and partly by extending the maximum period for which a person can be disqualified from five to 15 years—although this power will be exercisable only by courts of higher jurisdiction.
There is a further point. Some of the concern which has been expressed has been over the ability of some of those who ride roughshod over their customers or suppliers—whether out of unscrupulousness or extreme carelessness—to avoid winding up. One difficulty which has hindered the Department in pursuing such cases is the effect of the judgment in the case of the Director of Public Prosecutions v. Schildkamp in 1971. That judgment held that the criminal remedy for fraudulent trading applied only in circumstances in which the company was being wound up.
Therefore, I draw the attention of the House to clause 88, which would enable a case of fraudulent trading to be brought whether or not the company was being wound up. Furthermore, as fraudulent trading is an offence which can be tried either summarily or on indictment, clause 87 would enable an application for disqualification to be made in a case tried before the magistrates.
Our conclusion, therefore, is that the improvements already proposed in clause 87, together with our further proposals to which I shall come shortly, and the reform embodied in clause 88, will go a considerable way to meet the concern which has been expressed on this sensitive subject.
I turn first, however, to the Opposition's proposals. I do not believe that it is practicable to contemplate introducing a procedure for automatic disqualification, because the courts would undoubtedly entertain applications for leave to act from such so-called automatic disqualifications because of the serious consequences to the individuals concerned of such disqualification. The courts could not accommodate the resulting increase in work; nor has the Department the staff available to give evidence on such applications for leave to act. That latter


point is very important. The courts will not be able to decide whether a person should be given leave to act as a director unless it hears evidence from the Department.
This argument applies with particular force to the attempt by the Opposition in new clause 18 to render automatic the provisions of section 9 of the Insolvency Act 1976. They suggest the deletion of the test of a director's lack of fitness in that section—which is required before a disqualification order can be made—thereby making disqualification an automatic consequence of involvement in two insolvencies in five years. Those so disqualified would be able to apply for relief and, as I said, could be expected to try to clear their name and apply for relief with the quite impracticable results with regard to the demand on resources which I described.
I also point out that new clause 18 takes no account of the improvements that we are making in clause 87 which I have already described in outline. I believe these improvements meet the need for stricter and more effective means of disqualifying directors without the impracticable staffing consequences of the automatic disqualification proposal put forward by the Opposition.
I am, however, grateful to the Opposition for bringing forward new clause 33. We believe that it will most usefully strengthen the provisions of section 9 of the Insolvency Act 1976, particularly as regards the extension of the maximum period of disqualification for involvement in two or more insolvencies where the court considers that a director's conduct makes him unfit to be concerned in the management of a company. The widening of the coverage of such a disqualification order to include promotion, formation, receivership and liquidation will bring the section into line with the improvements we are making to section 188 of the Companies Act 1948.
Before turning to the Government's new clause 23, I should like to comment on new clauses 17 and 19 which have also been selected for debate. New clause 17 would place a duty on the court, in the course of the winding up of a company, to consider whether a disqualification order should be made. New clause 19 is similar, except that it would require the court to consider disqualification when entertaining a petition to wind up a company on the grounds of insolvency or fraud.
The intention of the proposal is no doubt to avoid the need for an application to be made to the court so that orders can be made without action by the Secretary of State. We believe that the proper way for such matters to be handled is to require an application to be made to the court for a disqualification order, which is what the law provides for at present in section 188 of the Companies Act 1948 and section 9 of the Insolvency Act 1976. In the circumstances of winding up, section 188 enables an application to be made to the court by the Secretary of State, the official receiver, or by the liquidator or by any person who is or has been a member or creditor of the company.
Section 9 of the Insolvency Act 1976, which enables application to be made where a director has been involved in at least two insolvencies within five years and where his conduct suggests that he is unfit to be concerned in the management of a company, enables the official receiver, who is the person who will have access to the facts of the case, to make an application. I would recommend to the 

House that these rights of application are entirely adequate and proper to ensure that disqualification orders are sought.
I also observe that, if the court were to have the power given to it by this proposal, it would need to call for evidence, particularly from the Department, to determine whether there are grounds for disqualification. This would represent an unnecessary duplication of obligation, since the Department would already in such cases be considering whether to apply for a disqualification order under the existing statutory powers.
To the extent that the proposal is intended to underline the need to disqualify persons where their conduct or convictions suggest that disqualification is an appropriate penalty, I am happy to confirm that it is the Department's policy to seek a disqualification order wherever it appears to be merited. I wish to emphasise the forthrightness of that declaration of policy. I do not therefore believe that there is any need to place a duty on the court as such to consider whether to disqualify a person. In the circumstances—I apologise for the length of time I have taken going through these complex matters—I therefore invite the Opposition to consider withdrawing this proposal on the basis of the considerable improvements that I have summarised and also taking account of the contribution made by Opposition Members to the tightening of the provision of disqualification in regard to section 9.
The same criticisms also attach to new clause 19. I do not, therefore, believe it to be necessary. There would also be a further difficulty in that the power of the court would apply before a winding up order was made. In those circumstances, no liquidator would have been appointed and thus there would be very little evidence on which the court could come to a view as to whether disqualification was appropriate. I would therefore stress that the present procedure—that of enabling applications to be made by those who are likely to be in possession of the facts and the importance of this will be appreciated by the Opposition—is best suited to the seeking of a disqualification order.
I turn now to the Government's proposal in clause 23. That clause will require companies to keep details of past directorships held by their directors in addition to the details of other current directorships which they are at present required to keep by virtue of section 200 of the Companies Act 1948. These details will be available for inspection in two ways. First, any member of a company or any other person—I am thinking here particularly of creditors or potential creditors or members—will be able to see such details on the register of directors that the company is required to keep at its registered office. Section 200(6) specifically provides for such inspection. Secondly, they will be able to examine such details on the company's file which is held in Companies House.
The purpose of the clause is to enable interested parties whether conducting business with a company or considering investment in it to be able to ascertain details of the record of any of its directors. It will in future be possible to obtain a list of all companies of which a person has been a director in the past five years and to inquire as to the success or otherwise of these concerns. I believe that our proposal more than meets the substance of the changes advocated by the Opposition in new clause 4 which would require a director who is involved in an insolvency to


disclose to the Registrar of Companies his former directorship of any other insolvent company, unless the court grants him relief from so doing.
Although, as I said in Committee, such a proposal is subject to two fundamental criticisms—I shall be mentioning them briefly—which our proposal is designed to avoid, I wish to record our debt to the hon. Members for Norwood (Mr. Fraser) and Hackney, Central (Mr. Davis) for the idea embodied in their proposal, which we have adopted and I believe made practicable. The first defect of new clause 4 is that it would apply to any former directorship irrespective of how long ago the company concerned became insolvent. I doubt the relevance of information about a person's career going back, say, 30 years. The second defect is that the flow of applications for relief would be considerable, because any director who felt that the insolvency was not caused by his actions, or who wished to suggest that it was not, would apply for relief from disclosure. Such applications for relief could lead to an unmanageable load of work for the courts and the Department of Trade which would be expected to take a view as to whether they should be contested in the public interest.
New clause 23, on the other hand, avoids the crucial manpower problems to which the Opposition's proposal would be prone. It also covers all directorships within a period of five years, irrespective of whether the companies concerned have become insolvent, thereby leaving the inquirer free to look at the business record of any such companies and not simply at those that were insolvent.
I wish to conclude with a few words about the detail of new clause 23. Subsection (2)(a) introduces the requirement that details of past directorships must be kept, while subsection (2)(b) relieves companies from keeping details of past or present directorships of a "relevant" company—that is, of any other company in the same group—or of a dormant company.
These two provisos are intended to avoid requiring companies to disclose unnecessary detail. Thus, one person may be director of a number of companies in a group, thereby leading to overlapping disclosure by each such company, yet the identity of the other members of the group can be readily found in the group's annual report and accounts and it is therefore unnecessary to require disclosure of directorships of other group companies. 
8 pm
On the other hand, a "dormant company" is defined in subsection (2)(c) as one in which no "significant accounting transaction" has taken place—that is, any transaction that is required to be entered in a company's accounting records—other than one arising from the taking of shares in the company by a subscriber to its memorandum in pursuance of an undertaking of his in the memorandum. This exemption will, therefore, relieve shelf companies—for example, those promoted by specialist firms—from having to disclose the inevitably numerous but purely nominal past directorships of those persons who act as their directors until they are sold and begin to trade.
Subsection (3) increases the penalty for refusal to permit inspection of the register, for default in keeping it, or for failing to send details of it to the Registrar of Companies, to the statutory maximum, which is currently £1,000. At present, the fine on summary convictions under section 200(7) of the Companies Act 1948 is one-fifth of

the statutory maximum—that is, £200. Similar increases are to be made in the case of conviction for continued contravention, and they represent the importance we attach to full disclosure of past directorships.
Finally, subsection (4) permits companies to send the new information on past directorships to the registrar when their next annual return is made, unless they have occasion to make a return of changes in the register of directors before that time rather than immediately after making the change in the register. This will avoid burdening companies with the need to make an extra return and avoid the risk of burying the registrar's staff under an immense mountain of paper.
Whilst I am dealing with technical details, I shall also speak on those Government amendments which have been selected for debate with new clause 23 since they are consequential upon it.
Amendments Nos. 139 and 166 increase the penalty and repeal the existing one for failure to make an annual return to the Registrar of Companies.
Amendment No. 146 introduces a definition of "the statutory maximum" into the Companies Act 1948 to apply to section 200 of that Act, as amended by new clause 23. Amendment No. 114 therefore deletes the definition in the Bill of "the statutory maximum", which is no longer needed. Amendments Nos. 1 and 110 will delete definitions to "the statutory maximum" in the Bill which also become superfluous.
I apologise again for having had to go into detail on these new clauses and amendments. I have spoken so fully, first, because it was necessary to establish the detail of an important matter such as this and, secondly, because I wanted to emphasise the great progress that has been made as a result of these changes. I refer to the tightening of procedure in an area about which I know Opposition Members were as concerned as we were. Certainly improvements were desired. I am glad that those improvements have been brought about. Further, I wanted to explain to the Opposition the difficulties about automatic disqualification. In the interest of tightening the system as much as possible, we have made what I believe are practical proposals which improve the situation. In the circumstances, therefore, I hope that the Opposition will consider withdrawing their new clauses.

Mr. John Fraser: I am grateful for the Under-Secretary of State's acknowledgment to the Opposition, and we, in turn, acknowledge our debt to organisations such as the Consumers Association and programmes such as "Checkpoint", which have highlighted what has been an abuse of company law.
I am grateful for the new clause that the Government have put forward and for the fact that they accept our new clause 33, on which I hope we shall have the opportunity to vote since the Government have indicated that they are willing to accept it.
Limited liability is a privilege that enables people to have no liability for a company's debts, provided that their shares are paid up. It is a necessary privilege. Without it, commercial investment would be impossible. But, like all privileges, it is open to abuse, and to some people limited liability has proved to be a racketeer's charter. The racket—or abuse—with which the Opposition clauses try to deal is the practice of companies bleeding the public of their money and escaping from liability by going into liquidation and then, much worse, the persons involved


forming another company and repeating the exercise a second, third, or fourth time and sometimes, even using the name of earlier failed companies. It is an abuse by people who bleed the company's money like leeches and have a statutory reincarnation. Having sucked enough blood and dropped off the body, they have gone into demise and have been able to re-form themselves and carry out the same practice time and again. Perhaps the best known example is that which has been outlined in Money Which?—that of the Lylybet case. I shall describe to the House the number of times that Lylybet has undergone a statutory reincarnation.
Lylybet Dishwashers Ltd. was formed in 1972 and dissolved in 1973 because it was not trading. Lylybet Dishwashers (Southern) Ltd. was formed in 1972 and the latest accounts show that the company is insolvent. That was followed by Lylybet Dishwashers (North West) Ltd. which was formed in 1974 but has been in compulsory liquidation since 1977. But the company had a charmed life because next came Lylybet Dishwashers (East Midlands) Ltd. which was formed in 1974 but dissolved in 1978 because it was not trading. Then there was a slight change of name to Lylybet Regulators and Controls Ltd. which was formed in 1977 but so far no accounts have been filed. We do not know what has happened to it. Then there was another slight change of name, to Dishmaster Ltd., which was formed in 1971 but was in voluntary liquidation in 1973 due to insolvency. Almost the same promoters then formed a company called Bridgedec Limited in 1970, but it was dissolved in 1979. They did not give up entirely. They gave up the name that they had got used to and started a company called Loftrooms Ltd. in 1978. The 1979 accounts showed a loss of over £65,000. To finish the whole thing off, Loftrooms (London) Ltd. was formed in 1969 but it stopped trading in 1978. Almost the same group of people was involved in every company.
If I drove through a red traffic light on three different occasions I would probably be disqualified from driving, but far too often a person can metaphorically run down his creditors, be reckless towards consumers, and disregard all the commercial signals and nothing seems to happen. He can go on from one corporate form to another, continuing to take money from the general public without necessarily committing a criminal offence. It is to that abuse that our set of new clauses is directed. The courts have been too lax in the exercise of their powers to disqualify people who are involved with insolvent companies and who abuse the privilege of corporate identity. The law that gives the dog two bites—it says that if a person has been involved in two or more insolvencies he may be disqualified—has not been tightened. The object of the new clause is to try to deal with those problems a little more forcefully in order to protect consumers and the general public.
A person can form a company and sell a product from door to door, take a considerable sum in deposits and pay such excessive salaries to directors or favourite members of the staff that the deposits are exhausted. If the company does not have enough money to continue trading it must go into liquidation, but no criminal offence has been committed and the persons involved can conduct the same operation time and again.
Another example of malpractice is the selling of goods with a guarantee. For example, someone may guarantee

to protect a car from rust for 20 years—a somewhat exaggerated claim, but one such company is mentioned in "Money Which?"—or guarantee that a mended roof will be rainproof for 20 years. The problem is that people sell those guarantees knowing that they intend to put their company into liquidation within two or three years and will subsequently engage in the same operations using a company with a similar name. That racket must be stopped.
I acknowledge the improvement that will result from the Government's new clause 23, which accepts the idea that I put forward in Committee of making directors disclose their former associations. I should like the clause to have gone further so that an asterisk was put against all former directorships that ended in the winding-up of a company on the grounds of insolvency. It is not good enough to leave the public to try to distinguish between successful and unsuccessful companies.
I believe that it would be right to put a duty on the courts to consider disqualification, so that a judge or magistrate would at least have to think about it and ask himself whether the conduct of a director had been so antipathetic to the interests of the general public that he ought to be disqualified. That approach is outlined in one set of new clauses.
Our other approach is even more far-reaching. It is that there should be automatic disqualification of all those involved in an insolvency unless they prove to the satisfaction of the court that the insolvency and the loss of money by creditors and consumers were not due to their mismanagement. That would be the ideal position. If a company goes bust and consumers and creditors lose money should the burden of proof be on the creditors or on those who took part in the management and conduct of the company?
I believe that if we are to tip the scales they must be tipped against those who have abused the privilege of limited liability. That is why the Opposition new clauses provide for automatic disqualification, subject to the persons involved being able to ask the court whether they may be absolved.
The Government's new clause is not enough, but it is a distinct improvement, and taken with our new clause 33, which the Government are willing to accept, it will begin to remove some of the difficulties. I welcome the fact that we have been able to make some progress.
We should prefer not to withdraw our new clauses, which we still support, but perhaps it will not be necessary to press them to a Division.

Mr. Trotter: I welcome new clause 33. It is a matter of continuing concern to those who provide credit to companies that there are cases—not as frequent as is sometimes made out, considering the vast volume of trade which takes place every day without fraud—in which a number of people are active in defrauding creditors of a limited company and using the privilege of limited liability to do so.
There is concern on both sides of the House that such people should be dealt with adequately, and I am concerned that we are not dealing with them adequately. The onus is too much on those associated with the liquidation, whether the liquidator, shareholder or creditor, to originate action. That is difficult for those people. 


My hon. Friend the Under-Secretary referred to section 188 of the 1948 Act which provides that the court, on application by the official receiver, the liquidator, a shareholder or a creditor, may make an order to prevent someone from being a director of a company. I suspect that few such orders have ever been made and I have certainly not been involved in any cases where that has happened.
I am not convinced that section 9 of the Insolvency Act 1976 is yet being used to the degree that I wish or with the speed that I should like to see. The gentlemen with whom we are concerned can operate with remarkable speed and can build and leave the shells of two or three companies in the time it takes for their activities to receive due attention.
It is the duty of the authorities to take the lead in dealing with such people. It cannot be left to those associated with a company, the victims or the liquidator. Often a company has hardly any money left in it and no funds are available for an investigation. I am pleased that the Government are prepared to accept new clause 33, which is an improvement on the present position, though I am not sure that we shall not have to have a second bite at the cherry, perhaps when an insolvency Bill is presented in a future Session.
New clause 33 provides that prohibition will apply also to someone acting as liquidator of a company. That is to be commended. I have in my hands a report about a liquidator who is apparently handling about 300 liquidations. He has a criminal record. He was convicted of two offences of dishonesty early in 1970, was adjudicated bankrupt some years before and, while bankrupt, he pleaded guilty to handling stolen goods. He has also been convicted of contravention of the Companies Act and has been in prison.
Yet that man has been able under the present law to act as the liquidator of companies. That is wholly wrong and I hope that new clause 33 will provide the power to deal with that sort of person as well as with directors. Clearly such people should not be allowed to act as liquidators, and I was delighted to read that he was removed by the court when a creditor engaged counsel and went to court. However, most creditors are not prepared to do that, whether with a director or one of those happily rare black sheep who act as liquidators.
I am delighted that the Government are prepared to accept new clause 33 and I hope that it will be applied with vigour. The clause will be of no use unless it is vigorously applied by the Department of Trade.

Mr. Eyre: I appreciate the remarks of my hon. Friend the Member for Tynemouth (Mr. Trotter) and also the good points that were made by the hon. Member for Norwood (Mr. Fraser). All hon. Members will appreciate the significance of Sir Kenneth Cork's committee and the study which is going on which will provide a basis for advance in this commplex area.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 2

DIRECTORS' REPORT TO INCLUDE, IN CASE OF CERTAIN COMPANIES, PARTICULARS OF EXPORTS

'(1) If, at the end of a financial year, a company subject to the requirements of paragraph 13A of Schedule 8 to the 1948 Act whose business consists in, or includes, the supplying of goods does not have subsidiaries, then, unless the turnover for that year (so far as stated in the accounts in respect of that year in pursuance of that paragraph) does not exceed £1,400,000, there shall be contained in the directors' report relating to that year—

if, in that year, goods have been exported by the company from the United Kingdom, a statement of the value of the goods that have been so exported from the United Kingdom during that year;
if, in that year, no goods have been so exported from the United Kingdom, a statement of that fact;
if, in that year, goods have been imported by the company to the United Kingdom, a statement of the value of the goods that have been so imported to the United Kingdom during that year;
if, in that year, no goods have been so imported to the United Kingdom, a statement of that fact.
(2) If, at the end of a financial year, a company has subsidiaries, then, except in a case in which neither the business of the company nor that of any of the subsidiaries consists in, or includes, the supplying of goods, or a case in which the company submits in respect of that year group accounts prepared as consolidated accounts in respect of itself and all its subidiaries and the turnover (so far as stated therein in pursuance of the said paragraph 13A) does not exceed £1,400,000, there shall be included in the directors' report relating to that year—
unless, in the case of the company and of each of its subsidiaries, no goods have been exported by it in that year from the United Kingdom, a statement of the aggregate of the values of the goods which, in the case of the company and of each of the subsidiaries, have been exported by it in that year from the United Kingdom;
if, in the case of the company and of each of its subsidiaries, no goods have been exported by it in that year from the United Kingdom, a statement of that fact;
unless, in the case of the company and of each of its subsidiaries, no goods have been imported by it in that year to the United Kingdom, a statement of the aggregate of the values of the goods which, in the case of the company and of each of the subsidiaries, have been imported by it in that year to the United Kingdom;
if, in the case of the company and of each of its subsidiaries, no goods have been imported by it in that year to the United Kingdom, a statement of that fact.

(3) For the purposes of this section, goods exported or imported by a company as the agent of another person shall be disregarded.

(4) The foregoing provisions of this section shall not require the disclosure of information in the director's report of a company if the directors thereof satisfy the Secretary of State for Trade that it is in the national interest that the information should not be disclosed.'.—[Mr. Geoffrey Robinson.]

Brought up, and read the First time.

Mr. Geoffrey Robinson: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this we may take amendment No. 178, in clause 16, page 25, leave out lines 39 and 40.

Mr. Robinson: It is with the indulgence of my right hon. and hon. Friends who speak officially for the Opposition on these matters that I make my maiden speech from the Dispatch Box. If I approach it with something less than the tense excitement that I savoured in anticipation of it, I am sure that you, Mr. Deputy Speaker, and all right hon. and hon. Members will understand why. However, the legislation must go on. The Government have introduced it, and it is our duty, where we think it


inappropriate, to oppose it. The purpose of moving new clause 2 is to reinsert in company legislation information that we believe is properly the property of the public and necessary also in the national interest.
May I say at the outset that it is difficult, in drafting any clause of this kind, to know where to draw the line as to which companies should or should not be included within the legislation. I would not die at the stake for the figure of £1.4 million which we have stipulated as being the amount above which the sort of information that we regard as necessary concerning a company's imports and exports should be provided. I personally would be prepared, if the principle were conceded by the Government, to put it at a considerably higher figure.
We discovered during the Committee stage of this Bill that underlying the opposing views of the Government and the Opposition was a fundamental attitude of mind. The Opposition attitude had inspired the Labour Government's Green Paper entitled "The Future of Company Reports", and within that was a statement with particular reference to exports and imports of individual companies, the future of company reports and the international trade statement that we requested within it. The Tory document, "Company Accounting and Disclosure", was a complete misnomer. In other words, it was accounting and non-disclosure. However, not satisfied with not disclosing, the Government now propose to go even further and remove from the 1967 Act a part regarding the importing and exporting of particular companies, so that even less information is available than in the past.
I shall not delay the House on this matter, because there is a sense of urgency to make progress this evening. However, I shall give one example from my personal experience when working as a senior executive with the Industrial Reorganisation Corporation. We were discussing a certain development programme involving Government aid to a large multinational company, Philips. The case was being made that Government aid was necessary so that the company could continue its marvellous export record. We were keen on the idea. The IRC was set up to stimulate investment and exports and, most important, to increase net exports. That must be the intention of all Governments, except this Government, who for some reason wish to increase imports and reduce output and exports. However, it must be the intention of all Governments to increase gross output and net exports.
When we considered the figures provided by the Philips corporation as a whole, we discovered that the corporation was a net importer. In other words, it imported more from its various plants abroad into this country than it exported from the United Kingdom. We then entered into a form of planning agreement with Philips, whereby the imbalance in its internal trade was eliminated, Government support of a certain kind was provided, and consequently the national economy benefited.
But, with the ineffable lucidity which characterised him throughout our debates in Committee, the Under-Secretary said that such information could be misleading. I quote what he said:
that figure is likely to be of little interest to shareholders and can be misleading—for example, when a company's exports consist largely of imported goods which may have been re-exported."—
[Official Report, Standing Committee A, 18 June 1981; c. 138.]

That is precisely why we want the information. We want to know the net exports of the large multinationals or the large national companies.
The only other reason given by the Under-Secretary in that debate for deleting what is already on the statute book was that a lot of companies provided goods to other companies, making goods in the United Kingdom which are subsequently exported, and that they would not receive credit for that. That is true, but the Under-Secretary does scant justice to those of us who are keenly interested in the performance of our manufacturing sector and the companies within it.
There is a further reason for disclosure. The Under-Secretary quoted as an example the motor components industry in the West Midlands, which both he and I have the honour to represent. He said that the motor components industry was one that largely supplied the domestic-based motor industry and therefore received little credit for it.
We all know that the motor components industry throughout the world is becoming increasingly internationally traded. Indeed, the reason that he gave for not having disclosure, is the very reason why we should have it.
I am pleased to see that the Minister of State in his elevated position, is present. He will recall the many late night sittings, which I hope will not be the case tonight, that we shared on two Finance Bills. There is no reason to withdraw the new clause. It should stay and be expanded. The new clause may be inadequately drafted—a matter on which the hon. and learned Gentleman is a greater expert than I. However, unless he is prepared to give something, we shall be bound to press the matter to a Division. This is a retrograde step—one which goes in the wrong direction.

Mr. Trotter: I have given considerable thought to the issue, but I cannot see what use these figures would be. It is all very well to say "Let us have them", and Opposition Members may find them interesting, but millions of hours would be needed to produce them. There are no book-keeping entries now on imports and exports in companies' books. Separate analyses and separate statistics would be needed, and a great deal of cost would result, as well as additional overheads for no benefit. The hon. Member for Coventry, North-West (Mr. Robinson) should tell us who would benefit from those figures. They cannot be of interest to more than a few curious people. No doubt the examples that the hon. Gentleman gave from my hon. and learned Friend's speeches in Committee were right. The figures would often be misleading, even to those curious enough to look at them. It could also be argued that publication of those figures could be helpful to a company's competitors. Therefore, I cannot support the new clause.

Mr. Peter Rees: I am sure that the House would like me to congratulate the hon. Member for Coventry, North-West (Mr. Robinson) on his maiden appearance on the Opposition Front Bench. We have had many amiable encounters in Committee proceedings on Finance Bills and I am delighted that the fortunes of war, or of politics, have brought us again into such close juxtaposition. However, I am not sure whether I am the appropriate person to offer congratulations as I have only recently taken up my present responsibilities.
I hope that the hon. Gentleman will forgive me if, having offered my congratulations—which I hope he will



feel able to accept—I take issue with him most strenuously on the substance of the new clause and the amendment. My hon. Friend the Member for Tynemouth (Mr. Trotter) puts the case succinctly and practically and we all depend on his experience as a practising accountant. He posed two questions: what use would the information be; and to whom?
One must balance the burden on companies—their directors and accountants—with the value of the information disclosed to those who have a right, whether shareholders, creditors or perhaps employees, to require it. Merely because companies have the privilege of incorporation and perhaps of limitation of liability, we are not obliged to demand that they should disclose a wealth of information that is of little relevance to those who have a right to scrutinise their activities. A balance must be struck.
The hon. Member for Coventry, North-West gave us an interesting example, which was derived from his considerable and distinguished industrial experience. We all know the contribution that he has made to the motor industry. I do not say that in any pejorative, critical, spirit. We know how successful he was in the areas of management to which he devoted his talents. We also know the contribution that he made to the activities of the IRC. He drew on that. However, if a company legitimately applies to the Government for financial support—whether through the Department of Industry or some agency of Government—the Department or agency is normally entitled to require information that will enable it to assess fairly the claim. Therefore, I was not impressed by that example.
Is it important that the shareholders and creditors should have detailed knowledge of the breakdown of the company's turnover as between exports and imports? It may be a matter of curiosity and of some general interest, but we must continually bear in mind the burden placed on the corporate sector. In our sophisticated, late twentieth century society the State imposes many burdens. We must scrutinise them and ask ourselves whether the value is justified. With a little diffidence, I differ from the hon. Gentleman—although he has more managerial experience than I—and argue that it is not justified.
I have less experience of this matter in relation to the Department of Trade than the hon. Member for Hackney, Central (Mr. Davis). However, I doubt whether the Department would benefit from such information. The resources are not available to process company accounts in such detail.
The hon. Member for Coventry, North-West might press me and argue that if the House were to decree that such information should be included, additional people would have to be hired to process it. However, the Department of Trade has other sources of information. No doubt the hon. Member for Hackney, Central can confirm that. It bases its analysis of the country's trading position on the statistical information collected by the Customs and Excise. That is probably a better source of information than that required under the new clause.
With his great experience, the hon. Member for Coventry, North-West will recognise that the Department of Trade would find such information out of date for macro-economic purposes. After all, the company report is concluded at the end of the company's financial year.

It would not be as up to date as the statistical information collected by Customs and Excise officers at our ports on exit and entry.
I hope that there is nothing much between the two sides of the House about the importance of having some information about exports and imports. However, the way suggested is probably not the right way. Even if it commended itself to some sections of the House, we must reflect on the burdens that we are placing on the corporate sector. We are not entitled to make unreasonable demands upon it merely because it has the privilege of incorporation.
I return to the point so trenchantly and succinctly made by my hon. Friend the Member for Tynemouth—what use would the information be, and to whom? I hope that the hon. Member for Coventry, North-West will not press the new clause to a Division. If he does, I hope that my right hon. and hon. Friends will reject it.

Mr. Geoffrey Robinson: I appreciate the tones and terms in which the counter-arguments were put by the Minister. However, I regret that they were not convincing. Each time we discuss this subject we hear the parrot cry about the burdens we are putting on the private sector and manufacturing companies. I am sensitive to them and I try to simplify the system. If ever there were a Bill that was meant to complicate the private sector's life, it is this. That is the irony. We are trying to leave in the legislation the requirement for this one simple piece of information. We are operating against a tidal wave of complexity and cross-referencing, rendering necessary consolidation of company legislation at the earliest opportunity. But again we hear the parrot cry of the burdens imposed on private sector companies.
The hon. Member for Tynemouth (Mr. Trotter) is a chartered accountant. He knows that if the information is recorded at source, at the point of entry, little extra administrative burden is imposed.
At the heart of the argument is the secrecy that the Government wish to achieve for company legislation. We believe that secrecy is the worst enemy of Government and of management. That is what the new clause is about. The information is there. We are asked "Who needs it?". The Minister of State, with his narrow, tunnel vision, can get to creditors and shareholders and then suddenly remembers that employees are mentioned in some legislation.
We believe that a further accountability is necessary—to the nation. The Minister admitted the relevance of the national importance when he referred to information in its consolidated form in the national expenditure accounts and trade accounts.
The country must live from its net exports of manufactured goods when the oil runs dry. The Minister says that so long as the information is aggregated we need nothing else. However, we are now importing more manufactures than we are exporting and the information must be available readily. It must be available to the Government who must act in a spirit of co-operation, and effectively. For those reasons and in the light of the Minister's unsatisfactory reply I urge my right hon. and hon. Friends to join me in the Lobby.

Question put, That the clause be read a Second time:—

The House divided: Ayes 143, Noes 207.

Division No. 302]

[8.40 pm]


AYES


Allaun, Frank
Lamborn, Harry


Anderson, Donald
Lamond, James


Archer, Rt Hon Peter
Lestor, Miss Joan


Bennett, Andrew(St'kp't N)
Lewis, Arthur (N'ham NW)


Bidwell, Sydney
Lewis, Ron (Carlisle)


Boothroyd, Miss Betty
Lofthouse, Geoffrey


Bottomley, Rt Hon A.(M'b'ro)
Lyon, Alexander (York)


Bray, Dr Jeremy
McCartney, Hugh


Brown, Hugh D. (Provan)
McDonald, Dr Oonagh


Brown, Ronald W. (H'ckn'y S)
McElhone, Frank


Buchan, Norman
McGuire, Michael (Ince)


Callaghan, Rt Hon J.
McKay, Allen (Penistone)


Callaghan, Jim (Midd't'n &amp; P)
MacKenzie, Rt Hon Gregor


Campbell, Ian
McNamara, Kevin


Campbell-Savours, Dale
McWilliam, John


Carmichael, Neil
Magee, Bryan


Clark, Dr David (S Shields)
Marks, Kenneth


Cocks, Rt Hon M. (B'stol S)
Mason, Rt Hon Roy



Concannon, Rt Hon J. D.
Maynard, Miss Joan


Conlan, Bernard
Millan, Rt Hon Bruce


Cook, Robin F.
Mitchell, R. C. (Soton ltchen)


Cowans, Harry

Morris, Rt Hon A. (W'shawe)


Crowther, Stan
Morris, Rt Hon C. (O'shaw)


Cryer, Bob
Mulley, Rt Hon Frederick


Cunliffe, Lawrence
Newens, Stanley


Cunningham, G. (Islington S)
Owen, Rt Hon Dr David


Cunningham, Dr J. (W'h'n)
Palmer, Arthur


Dalyell, Tam
Park, George


Davidson, Arthur
Parry, Robert


Davis, Clinton (Hackney C)
Pavitt, Laurie


Davis, T. (B'ham, Stechf'd)
Powell, Raymond (Ogmore)


Deakins, Eric
Prescott, John


Dewar, Donald
Price, C. (Lewisham W)


Dixon, Donald
Race, Reg


Dormand, Jack
Radice, Giles


Douglas, Dick
Roberts, Albert (Normanton)


Dubs, Alfred
Roberts, Ernest (Hackney N)


Duffy, A. E. P.
Robertson, George


Eadie, Alex
Robinson, G. (Coventry NW)


Eastham, Ken
Sandelson, Neville


Ellis, R. (NE D'bysh're)
Sever, John


Ennals, Rt Hon David
Shore, Rt Hon Peter



Evans, John (Newton)
Silkin, Rt Hon J. (Deptford)


Ewing, Harry
Skinner, Dennis


Faulds, Andrew
Snape, Peter


Field, Frank
Soley, Clive


Fitch, Alan
Spearing, Nigel


Fletcher, L. R. (Ilkeston)
Spriggs, Leslie


Fletcher, Ted (Darlington)
Stoddart, David


Ford, Ben
Summerskill, Hon Dr Shirley


Forrester, John
Thorne, Stan (Preston South)


Foster, Derek
Tilley, John


Foulkes, George
Torney, Tom


Fraser, J. (Lamb'th, N'w'd)
Urwin, Rt Hon Tom


Garrett, John (Norwich S)
Wainwright, E.(Dearne V)


Garrett, W. E. (Wallsend)
Walker, Rt Hon H.(D'caster)


George, Bruce
Watkins, David


Grant, George (Morpeth)
Weetch, Ken


Hamilton, James (Bothwell)
Welsh, Michael


Hamilton, W. W. (C'tral Fife)
White, Frank R.


Hardy, Peter
Whitlock, William


Harrison, Rt Hon Walter
Wigley, Dafydd


Hart, Rt Hon Dame Judith
Williams, Rt Hon A.(S'sea W)


Haynes, Frank
Wilson, Gordon (Dundee E)


Heffer, Eric S.
Wilson, William (C'try SE)


Holland, Philip (Carlton)
Winnick, David


Home Robertson, John
Woolmer, Kenneth


Hooley, Frank
Wright, Sheila


Hoyle, Douglas
Young, David (Bolton E)


Hughes, Mark (Durham)



Hughes, Roy (Newport)
Tellers for the Ayes:


Jay, Rt Hon Douglas
Mr. George Morton and


John, Brynmor
Mr. Joseph Dean.


Jones, Barry (East Flint)





NOES


Alexander, Richard
Hawksley, Warren


Ancram, Michael
Hayhoe, Barney


Aspinwall, Jack
Heath, Rt Hon Edward


Atkins, Rt Hon H.(S'thorne)
Henderson, Barry


Baker, Nicholas (N Dorset)
Higgins, Rt Hon Terence L.


Banks, Robert
Hill, James


Beaumont-Dark, Anthony
Holland, Philip (Carlton)


Beith, A. J.
Hordern, Peter



Bendall, Vivian
Hunt, David (Wirral)


Bennett, Sir Frederic (T'bay)
Hunt, John (Ravensbourne)


Benyon, Thomas (A'don)
Jenkin, Rt Hon Patrick


Benyon, W. (Buckingham)
Johnston, Russell (Inverness)


Berry, Hon Anthony
Jopling, Rt Hon Michael


Biffen, Rt Hon John
Kershaw, Sir Anthony


Biggs-Davison, Sir John
King, Rt Hon Tom


Blackburn, John
Kitson, Sir Timothy


Blaker, Peter
Knight, Mrs Jill


Bonsor, Sir Nicholas
Lamont, Norman


Boscawen, Hon Robert
Lee, John


Boyson, Dr Rhodes
Le Marchant, Spencer


Braine, Sir Bernard
Lennox-Boyd, Hon Mark


Bright, Graham
Lloyd, Ian (Havant &amp; W'loo)


Brinton, Tim
Lloyd, Peter (Fareham)


Brittan, Rt. Hon. Leon
Loveridge, John


Brooke, Hon Peter
Lyell, Nicholas


Brown, Michael(Brigg &amp; Sc'n)
Macfarlane, Neil


Bruce-Gardyne, John
MacGregor, John


Bryan, Sir Paul
Macmillan, Rt Hon M.


Budgen, Nick
Major, John


Bulmer, Esmond
Marland, Paul


Burden, Sir Frederick
Marlow, Antony


Cadbury, Jocelyn
Mather, Carol


Carlisle, John (Luton West)
Mawby, Ray


Carlisle, Kenneth (Lincoln)
Mawhinney, Dr Brian


Carlisle, Rt Hon M. (R'c'n )
Maxwell-Hyslop, Robin


Chalker, Mrs. Lynda
Mellor, David


Chapman, Sydney
Miller, Hal (B'grove)


Churchill, W. S.
Mills, Iain (Meriden)


Clark, Hon A. (Plym'th, S'n)
Mitchell, David (Basingstoke)


Clarke, Kenneth (Rushcliffe)
Moate, Roger


Clegg, Sir Walter
Monro, Sir Hector


Cope, John

Montgomery, Fergus


Corrie, John
Morgan, Geraint


Cranborne, Viscount
Morrison, Hon C. (Devizes)


Critchley, Julian
Morrison, Hon P. (Chester)


Crouch, David
Mudd, David


Dorrell, Stephen
Murphy, Christopher


Dover, Denshore
Myles, David


Durant, Tony
Neale, Gerrard


Edwards, Rt Hon N. (P'broke)
Needham, Richard


Elliott, Sir William
Nelson, Anthony


Eyre, Reginald
Newton, Tony


Fairgrieve, Sir Russell
Osborn, John


Faith, Mrs Sheila
Page, John (Harrow, West)


Fenner, Mrs Peggy
Page, Richard (SW Herts)


Finsberg, Geoffrey
Patten, Christopher (Bath)


Fisher, Sir Nigel
Pattie, Geoffrey


Fletcher, A. (Ed'nb'gh N)
Pawsey, James


Fletcher-Cooke, Sir Charles
Penhaligon, David



Forman, Nigel
Percival, Sir Ian


Fox, Marcus
Pink, R. Bonner


Fraser, Peter (South Angus)
Pollock, Alexander


Gardiner, George (Reigate)
Prentice, Rt Hon Reg


Garel-Jones, Tristan
Proctor, K. Harvey


Goodhew, Victor
Raison, Timothy


Goodlad, Alastair
Rathbone, Tim


Gorst, John
Rees, Peter (Dover and Deal)


Gow, Ian
Rees-Davies, W. R.


Gower, Sir Raymond
Rhodes James, Robert


Gray, Hamish
Rhys Williams, Sir Brandon


Greenway, Harry
Rifkind, Malcolm


Griffiths, E.(B'y St. Edm'ds)
Roberts, M. (Cardiff NW)


Griffiths, Peter Portsm'th N)
Roberts, Wyn (Conway)


Grimond, Rt Hon J.
Rossi, Hugh


Grist, Ian
Royle, Sir Anthony


Hamilton, Michael (Salisbury)
Sainsbury, Hon Timothy


Hampson, Dr Keith
St. John-Stevas, Rt Hon N.


Haselhurst, Alan
Shaw, Giles (Pudsey)


Hawkins, Paul
Shaw, Michael (Scarborough)

Shelton, William (Streatham)
Trippier, David


Shepherd, Colin (Hereford)
Trotter, Neville


Shersby, Michael
Vaughan, Dr Gerard


Silvester, Fred
Viggers, Peter


Skeet, T. H. H.
Waddington, David


Smith, Dudley
Wakeham, John


Speed, Keith
Waldegrave, Hon William


Speller, Tony
Walker, B. (Perth)


Spence, John
Walker-Smith, Rt Hon Sir D.


Spicer, Jim (West Dorset)
Wall, Sir Patrick


Squire, Robin
Waller, Gary


Stainton, Keith
Warren, Kenneth


Stanbrook, Ivor
Watson, John


Stanley, John
Wells, John (Maidstone)


Stevens, Martin
Wells, Bowen


Stewart, Ian (Hitchin)
Wheeler, John


Stewart, A.(E Renfrewshire)
Whitney, Raymond


Stokes, John
Wickenden, Keith


Tapsell, Peter
Williams, D.(Montgomery)


Tebbit, Rt Hon Norman
Winterton, Nicholas


Temple-Morris, Peter
Wolfson, Mark


Thatcher, Rt Hon Mrs M.
Young, Sir George (Acton)


Thomas, Rt Hon Peter



Thornton, Malcolm
Tellers for the Noes:


Townend, John (Bridlington)
Mr. Selwyn Gummer and


Townsend, Cyril D, (B'heath)
Mr. Donald Thompson.

Question accordingly negatived.

New Clause 3

EMPLOYMENT STATEMENT

'(1) In section 18(1) of the 1967 Act (Director's report etc.) there shall be added the following—

"(c) Date for manual and non-manual men and women, full time, part time, casual and homeworkers, showing, in aggregate and separately for plants employing over 500 workers—

Numbers employed in United Kingdom at year's end.
Aggregate annual remuneration.
Total annual employment cost and a breakdown of non-wage costs.
Average weekly earnings for the last week in April and October each year.
Days lost through sickness.
Accidents and days lost.
Total days spent in training and costs of training.
Numbers employed outside the United Kingdom, by country.

(d) Aggregate information and separate information for plants employing over 500 workers on—

Periods of short time working, indicating reasons.
Turnover of employment.
Retirements and pre-retirement arrangements.
Redundancies, total redundancy payments and arrangements made to assist those affected.
Pension provisions, stating whether the company has contracted out of the State additional pension scheme."

(2) In section 18(2) of the 1967 Act there shall be added the following—

"(c) Date for manual and non-manual men and women, full time, part time, casual and homeworkers, showing in aggregate and separately for plants of the company and the subsidiaries employing over 500 workers—

Numbers employed in United Kingdom at year's end.
Aggregate annual remuneration.
Total annual employment cost and a breakdown of non-wage costs.
Average weekly earnings for the last week in April and October each year.
Days lost through sickness.

Accidents and days lost.
Total days spent in training and costs of training.
Numbers employed outside the United Kingdom, by country.

(d) Aggregate information and separate information for plants of the company and subsidiaries employing over 500 workers on—

Periods of short time working, indicating reasons.
Turnover of employment.
Retirement and pre-retirement arrangements.
Redundancies, total redundancy payments and arrangements made to assist those affected.
Pension provisions, stating whether the company and any subsidiaries have contracted out of the State additional pension scheme .".'—[Mr. Clinton Davis.]

Brought up, and read the First time.

Mr. Clinton Davis: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take the following:
New clause 7—Pension reporting.
New clause 8—Statement of source and application of funds.

Mr. Davis: We have argued for an employment statement to be included in a directors' report. We did that in Committee, and we maintain that view. The drafting of the new clause is to some extent different from that which we argued in Committee, but the principle underlying it is the same. The philosophy that we adopt is that there should be more open government of companies, notably in the medium and large companies, while the Government take the opposite view.
Shrouded in the misty argument about cutting down on bureaucracy, which we have heard incessantly from the Under-Secretary, is the real argument for enabling companies within the areas that I have described to hide important aspects of information about their affairs, or at least to make it more difficult for those seeking such information to procure it. Therefore, there remains a substantial area of conflict between the Government and ourselves on that matter. Our approach is healthier. It is interesting to observe that the United States takes much the same line.
All too often the Government's approach is dominated by the traditional, somewhat antiquated concept that companies are almost exclusively responsible to their shareholders and creditors, whereas we say that that doctrine should be substantially qualified and extended to employees, customers and society at large.
The Government find it difficult to argue against the substance of the case that we have put forward. they say that they have no opposition to the principle, but merely to encompassing the change that we seek in law. They say that they believe in the voluntary approach to these matters.
The Green Paper issued by the Government said:
A number of companies prepare statements about employment for inclusion in a separate report to employees. The Government welcomes these moves towards producing employment reports and also the experiments in wider social reporting which is being undertaken by a number of companies, but does not consider that, for the present at least, legislation has a part to play in encouraging these developments.
The Government use the phrase
for the present at least".
Perhaps they have it in mind to adopt our proposals in future, but I doubt that.
The information that we are seeking in the new clause is highly relevant to the work force and of considerable significance to the public. it is important for the public and the work force to know how a company's employment


resources are being managed. For example, should not the public know how large and medium-sized companies—and medium-sized companies, within the Government's definition, are very substantial indeed—are fulfilling their responsibilities for training and retraining, for registering the contribution that is made by them towards the social good of the community as a whole, how they are operating apprenticeship schemes—which are disappearing all too rapidly—and how they are dealing with accidents at work? All those matters, and many more, are dealt with specifically in the new clause, and we say that they ought to be known by the public and by the work force.
In their previous Bill the Government made a concession. They said that there should be a form of employment statement for the disabled. We had been urging that and eventually the Government relented. If they are prepared to concede the principle for the disabled, why should they not concede it for the whole work force? What is the difference in principle between the two? The Government must convey their argument about it to the House tonight.
Why do we say that the voluntary approach is inadequate? We say that it is based essentially on a false proposition—that companies are prepared all too readily to divulge the information. I do not believe that that is the evidence. But the the Government say "We ought not to impose too great a bureaucracy on the private sector with regard to employment statements, pension requirements, pension reporting, and so on, because it has far too much to do". Is it not strange that the Government employ the voluntary approach for companies but refuse to do it for trade unions? With trade unions there has to be the force of law, but with the private sector—even with modest provisions such as these—we have to rely on the voluntary approach.
In this context it is not idle to consider the enormous concentration and power of industry in our society today. I quoted the statistics in Committee. In 1950, the top 100 companies in Britain produced 20 per cent. of our national output. In 1979 the figure was nearing 60 per cent. In 1980–81 it is close to 70 per cent. Many of these companies operate multinationally. Most exercise enormous power, and it is a power that is concentrated in relatively few hands, all too often closely linked, and barely accountable to the community, to employees and to consumers. We have to deal with that situation. These modest proposals are one way of getting beneath the shroud that is sometimes used by companies to hide important information that ought to be readily available. That is why we are putting forward the proposition.
We are not acting in isolation. In France, even under the regime of Giscard d'Estaing, far more extensive reporting on employment statements was required than we have provided for in our modest amendment. In Belgium, Holland and West Germany disclosure is far more extensive than in this country, so we ask the Government to change their mind on this matter. We believe that it would be a great advance and that it would be appreciated by the work force. The Government ought to do it.
Pension reporting is dealt with in new clause 7. The Government say that they are not opposed in principle to the concept of pension reporting. Their objections lie essentially on the following grounds. They say that they 

do not want to increase the requirements for statutory reporting, that it is inconsistent with their general policy. They say that an accounting standard is being produced. Lastly, they say that the new provision in the Bill goes further than anything that has previously been prescribed.
9 pm
I have already dealt with the importance of including the employment statement in the directors' reports. We believe that pensions reporting is perhaps even more important. Some pension fund trustees have no obligation to produce any accounts at all, let alone have them audited, yet pension costs form a significant proportion of the total payroll cost.
Paragraph 50(4) of schedule 1 requires particulars of pension commitments actually provided in the accounts to be disclosed, and some similar information is required of pension commitments for which no provision has been made, but no guidance is given of the kind of detail required. There is no framework.
I believe that the voluntary approach is pretty useless. Very few companies give more than the barest possible details and no accounting standard has yet been provided, although the accountants' profession has been working on this since 1975. We have no assurance that an accounting standard will be available in the near future or will satisfy the standards that should apply, because I suspect that when a standard emerges it will be the result of considerable compromise.
We therefore contend that there is a strong case for a framework of more informative reporting to be established, that it ought to be done now and that the best way of doing it is in the Bill. This would enable the actuarial and accounting professions to develop more detailed guidance to provide the framework for the new accounting standard. We have waited too long for this. It is important that we press this matter to a Division. We shall do so on the basis of the employment statement, but we put on record our strong views on pension reporting.
I concede that I do not place so much reliance on the statement of source and application of funds. Indeed, although it has been selected for discussion in this debate, I do not think that I should press the matter to a Division.
I therefore base my arguments primarily upon the need for more open government within private industry, or at least within the area of private industry comprising the large and medium-sized companies, and I hope—although I suspect that I shall be disappointed—that the Minister will come forward with a more positive reply than his colleague was able to give in Committee.

Mr. Donald Anderson: My hon. Friend the Member for Hackney, Central (Mr. Davis) has moved the new clause with his usual facility, clarity and brevity. I shall follow him, at least in the brevity.
In view of the comparative position in EEC countries in terms of reporting obligations, I stand somewhat amazed at the moderation of the terms of the new clause. We know, particularly in relation to new clause 3, that the addition of a new obligation is proposed in respect of the statement. I concede that a balance must be struck between the argument that one is simply increasing bureaucracy by such new obligations, creating red tape and diverting the business man from his true function of producing and selling the goods, and the arguments relating to the company's social responsibilities. 


Under new clause 3, the obligation is to be placed only upon medium and larger companies, so the Government cannot argue that it will be oppressive to smaller companies. I suspect that all the information sought in new clause 3 is already readily available to the companies in various forms. It is, therefore, not a substantial obligation upon them simply to collate information which is probably already available to them if only they put it together. Moreover, as my hon. Friend has said, it is a move away from the nineteenth century definition of a company and the rather narrow definition of its obligations in respect only of its shareholders to the more modern concept of a company having community and social responsibilities. Certainly, the information sought in the new clause is of public concern.
My hon. Friend the Member for Hackney, Central said that details of the training facilities undertaken by a company would be made available. However, people in areas such as my own think of the extent to which apprenticeships have halved or more in the recent past. Although the Government may say that they are wedded to the voluntary principle and self-regulation, in these Companies Bills they are forced to move some steps away from self-regulation—for example, with insider dealing, concert parties and so on. Self-regulation is gradually being eroded and it seems that the Government are unwillingly being dragged towards a wider and more modern definition of a company's responsibilities.
If modest new clause 3 is now rejected, and on the precedent of the moves away from self-regulation and the voluntary principle, we can promise the Government that this will not be the end of the matter. Just as we have Company Bills year after year and Session after Session, we shall continue to raise this matter until the Government eventually succumb.

Mr. Peter Rees: I can reassure the hon. Member for Swansea, East (Mr. Anderson). It is certainly not the intention of this Administration that there should be Companies Bills year after year. We regret having troubled the House with Companies Bills in two successive years. However, neither the House nor the hon. Gentleman should regard that as establishing any kind of precedent. But as I said earlier, one's perception of company problems and their nature develops and, naturally, we must keep abreast of them.

Mr. Anderson: That is not quite what I meant. I was thinking in terms of the pipeline of European directives which the Government are gradually having to accept.

Mr. Rees: The hon. Gentleman is quite right in one sense. I do not say that we would not have had this Companies Bill had it not been for the fourth directive, but that was part of the justification for troubling the House yet again with a long and complicated Companies Bill.
The hon. Gentleman is absolutely right. There is an output at Brussels, which is both constructive and illuminating, of which we shall take account at appropriate moments. However, the hon. Gentleman should not feel that there is any comparability between Companies Bills and Finance Bills because that would be going a little too far.
I hope that there is not too much between us on these issues. I assure Labour Members that we are not being dragged protesting into the late twentieth century. I do not

want to take the debate into acrimonious and partisan areas from which we have managed to escape so far, but I do not recall that in the nineteenth century the Tory Party was the party of mill owners. The mill-owners may have made their contribution to the country's economy, but the Tory Party can look back to Lord Shaftesbury and thereafter to a wide range of enlightened legislation in the whole area of industrial relations and so on.
If Labour Members want some tangible evidence of our recognition of the debt that companies and their directors owe to their employees, I need only remind them that, for the first time, in the Companies Act 1980 directors were specifically permitted on winding-up to take account of the interests of employees.

Mr. Anderson: That is not enforceable.

Mr. Rees: The hon. Gentleman, who is a member of the legal profession, says "That is not enforceable." The whole point is that prior to that there was some question as to whether directors were entitled to apply the assets of a company in the course of a winding-up for the benefit of employees.
However, I do not believe that we need stray too far into the technicalities. As the hon. Gentleman may guess, I am very ready to debate legal technicalities, but I do not believe that it would generate the debate that we need to illuminate the new clauses. Nor would it grip the minds of other hon. Members who do not have a legal background. However, perhaps on some other occasion we can engage in friendly battle.
I recognise the more general points that the hon. Member for Hackney, Central (Mr. Davis) makes, but I listened in vain to his speech for a recognition that there are certain obligations in the first schedule which states that a great range of information is to be included in a director's report on matters touched on, I admit, rather more comprehensively in his provisions.
We have to ask ourselves whether employees are at a disadvantage vis-à-vis the company either under schedule 1 or, indeed, under other statutory provisions. The Employment Protection Act 1975—no doubt the hon. Gentleman will claim credit for it and perhaps correctly so, as it was introduced by the previous Administration—indicates a whole range of areas where information must be given. The Health and Safety at Work etc. Act 1974 does so in another area of employment. Therefore, there is provision for relevant information to be available to employees and those who represent them in negotiation or otherwise in those and other Acts. It is not as though they are completely excluded from any knowledge of what is happening in the management of the companies that employ them. I suggest that there is sufficient information there and also in the matter of pensions.
If the House refers again to schedule 1 and particularly paragraph 56 it will see that the directors have to return:
wages and salaries paid or payable in respect of that year to those persons"—
that is, employees—
social security costs incurred by the company on their behalf; and other pension costs so incurred;
so it is not as though there is no information to be given.
The practice in France and other countries has been referred to. In most of those countries the industrial structure is a little different.

Mr. D. N. Campbell-Savours: More successful.

Mr. Rees: The hon. Gentleman may fairly make that point.

Mr. Campbell-Savours: That is the connection.

Mr. Rees: The third new clause, as the hon. Member for Hackney, Central was disposed to agree, is perhaps not quite in the same class. It raises a very interesting and perhaps important accounting point—the source of funds point. I understand from my reading of Hansard that this was the subject of some slight debate upstairs in the Standing Committee. I recognise the general points that were made. I am sure that the hon. Gentleman was right not to elaborate the debate, because those who pay attention to these matters know the various considerations. He will be the first to admit that this is covered by SSAP 10. It is a question whether that goes far enough or whether it should be given the force of law. I believe that in this area it is better to leave the accountancy profession to work out the rules, subject, of course, to the general oversight of Parliament. I believe that the accountancy profession is sufficiently adroit and sensitive—

Mr. Clinton Davis: I have not pressed the argument about new clause 8. Can the hon. and learned Gentleman give some information, however, on the progress being made with regard to the accounting standard relating to pension reporting? Hon. Members were given some information by the Government in Committee, but progress seems terribly dilatory.

Mr. Rees: The hon. Gentleman may level that criticism at a distinguished profession of which neither he nor I am a member. I do not believe that there is any need for Government intervention. I believe that the profession is aware of its responsibilities. The Government will watch, benevolently but carefully, developments in that field.
The hon. Gentleman fairly put the case on new clause 8. I think that this is adequately covered by SSAP 10. I hope that, on reflection, the hon. Gentleman agrees that this matter can perhaps be left to the accountancy profession, although the Government do not absolve themselves from all responsibility.
I come back to the two questions that relate more nearly to employees and to pensions. I hope that I have deployed the considerations that have weighed with me and which lead me to ask the hon. Gentleman not to press his proposal to a Division. If he feels disposed so to do, I would ask the House to reject it. I do not say that I have any doubts about the position that I have deployed. One approaches these matters with a certain diffidence. I did not have the privilege of sitting on the Standing Committee. I have read the debates but I have, perhaps, not got the full immediacy of them. I have not been subjected, day after day, to the relentless but charming force of the hon. Member for Hackney, Central and the arguments of his hon. Friends. If, however, I had any doubts, I would be fortified by what I have read in the Green Paper entitled "The Future of Company Reports" published in July 1977 by the previous Administration. The general principles to be applied in considering this kind of problem are fairly set out in paragraph 8 of that document. I hope that the House will forgive me if I read them: 

In considering any proposal for extra disclosure in company reports a number of criteria need to be applied. The most important criterion is whether publication will clearly assist those with a direct interest in the company to gain a better understanding of the affairs of the company as a whole or a significant part of it.
I venture to put to the House that the existing requirements coupled with the requirements of other legislation provide adequate information in this field. The document goes on to state fairly:
But there are other considerations that tend to limit the amount of information to be disclosed: is the information already available,"—
yes , I suggest that it is——
or would the cost of collecting and presenting it be prohibitive?
I think that, in many cases, this would be so.

Mr. Anderson: Has any consideration been given by the Government to how much additional work will be necessary within a company to collate this information? Is it not right that all, or virtually all, the information requested is readily available in companies and there is not, therefore, a substantial additional obligation?

Mr. Rees: No one could give a confident answer to that question. If I were to attempt to quantify the cost I would not be believed, and rightly so. The cost must vary according to the circumstances of each company. Various factors are involved, including the spread of a company's operations, where workers are employed, how many are part-time and how many are full-time and so on. A whole range of factors are involved and they make it impossible to give a confident answer. We should err on the side of caution unless we are persuaded that information is crucial. I suggest that in some cases the cost of obtaining and supplying the information would indeed be prohibitive.
The Green Paper also asks whether there is
a danger of revealing information of value to competitors
I suggest that in many cases that would also be a factor. Assisted considerably by the Green Paper, I suggest to the hon. Member for Hackney, Central, who must have had a hand in its preparation——

Mr. Campbell-Savours: The Minister referred to the Green Paper's statement that it would not be convenient for companies to produce information at reasonable expense. But what area of the new clause is not covered by information that is already available in any company with more than 500 employees? There is not one question in the new clause to which such a company would not have the answer. Can the Minister pick out one area where information would not be available?

Mr. Rees: I have no doubt that information could be collected.

Mr. Campbell-Savours: It is already collected.

Mr. Rees: I doubt that. Collecting, collating, analysing and distilling information in the terms of the new clause would be an unwarrantable burden on companies.

Mr. Campbell-Savours: Be specific.

Mr. Rees: The hon. Gentleman is asking me to look through a long clause. I could readily do so, but I suspect from the hon. Gentleman's agreeable contributions to Finance Bill debates that he has some slight knowledge of industry and he will know that, although information may be available, it may not be available centrally but only at various branches. The cost of collecting, distilling and


analysing information would in many cases—I do not say every case—be an unwarrantable burden on the company concerned.
Bearing in mind the broad principles so elegantly set out in the Green Paper of 1977, which the hon. Member for Hackney, Central has no doubt been able to reflect on for many years—I did not notice any rush to translate those aspirations into legislation between 1977 and 1979—I ask the Opposition not to press the new clause to a Division. I think that, at heart, we approach the problems in the same way. If the hon. Gentleman presses the new clause to a Division, I hope that my right hon. and hon. Friends will unhesitatingly reject it.

Mr. Clinton Davis: The Minister for Trade constantly refers to agreeable contributions. His was no less agreeable than anyone else's, but perhaps he has to try to be more agreeable than anyone else because he is trying to hide an implausible case.
The Minister quoted the 1977 Green Paper at me. I was, to some extent, part author of that document. I wish that he had read on from the part that he quoted, because on page 9 we argued strongly for an employment statement. We said that it was appropriate that that should be embodied in legislation dealing with the fourth directive. We committed ourselves to that, and I shall read one paragraph that may even commend itself to the Minister:
What is proposed is that companies should publish an employment statement which sets out information about its workforce and employment policies which are relevant not only to employees themselves but to shareholders and others concerned with the company. The aim is to provide sufficient information about the workforce and about the way in which the employment resources are managed to give an indication of the effectiveness of management in this crucial area of the company's activities, and the way in which the company is meeting its social obligations with respect, for example, to training of school-leavers or the employment of the disabled.

Mr. Wickenden: That is meaningless.

Mr. Davis: The hon. Member for Dorking (Mr. Wickenden) says that it is meaningless. It was so meaningless that in the 1980 Bill the Government decided to enact a provision that there should be a statement in the directors' report on the employment of the disabled. The hon. Member for Dorking is willing himself to vote, in future, against his Government. In his case, it will take a great deal of will power. This is a reasonable step to take and it is not burdensome. The better companies can manage it. Those companies that are less efficient and less willing to practise open government and are not prepared to do so need a shove. That is what the employment statement is all about.
Precious little has been said about pension reporting. I have made a reasonable case for establishing that the accountancy profession also needs a shove in this respect. Pension reporting is vital to the work force and to those who wish to know how a company is fulfilling its social obligations. It is also important as regards profitability. It is not good enough that the accountancy profession should take six years to play around with a draft accounting standard. If the profession is not prepared to do something, the Government should. Indeed, a Labour Government would do something. The information is important and should not be hidden in the way that many companies hide it. Disclosure obligations in this connection are not sufficiently expressed in our law, and the Government's proposals are wholly inadequate. Therefore, the disagree-

ment between the Government and the Opposition should be reflected in a Division. Accordingly, we shall divide the House on the clause dealing with the employment statement.
Question put, That the clause be read a Second time:—

The House divided: Ayes 130, Noes 195.

Division No. 303]
[9.25 pm


AYES


Allaun, Frank
Jones, Barry (East Flint)


Anderson, DonaldM
Kilroy-Silk, Robert


Archer, Rt Hon Peter
Lamborn, Harry


Bennett, Andrew (St'kp't N)
Lamond, James


Boothroyd, Miss Betty
Lestor, Miss Joan


Bottomley, Rt Hon A.(M'b'ro)
Lewis, Arthur (N'ham NW)


Bray, Dr Jeremy
Lewis, Ron (Carlisle)


Brown, Hugh D. (Proven)
Lofthouse, Geoffrey


Brown, Ronald W. (H'ckn'y S)
Lyon, Alexander (York)


Buchan, Norman
McCartney, Hugh


Callaghan, Rt Hon J.
McDonald, Dr Oonagh


Callaghan, Jim (Midd't'n &amp; P)
McElhone, Frank


Campbell, Ian
McGuire, Michael (Ince)


Campbell-Savours, Dale
MacKenzie, Rt Hon Gregor


Carmichael, Neil
McWilliam, John


Clark, Dr David (S Shields)
Magee, Bryan


Cocks, Rt Hon M. (B'stol S)
Marks, Kenneth



Concannon, Rt Hon J. D.
Maynard, Miss Joan


Conlan, Bernard
Millan, Rt Hon Bruce


Cook, Robin F.
Mitchell, R. C. (Soton Itchen)


Cowans, Harry
Morris, Rt Hon A. (W'shawe)


Crowther, Stan
Morris, Rt Hon C. (O'shaw)


Cryer, Bob
Morton, George


Cunliffe, Lawrence
Mulley, Rt Hon Frederick


Cunningham, G. (Islington S)
Newens, Stanley


Cunningham, Dr J. (W'h'n)
Owen, Rt Hon Dr David


Dalyell, Tam
Palmer, Arthur


Davidson, Arthur
Parry, Robert



Davis, Clinton (Hackney C)
Pavitt, Laurie


Davis, T. (B'ham, Stechf'd)
Powell, Raymond (Ogmore)


Deakins, Eric
Prescott, John


Dean, Joseph (Leeds West)
Price, C. (Lewisham W)


Dixon, Donald
Race, Reg


Dormand, Jack
Radice, Giles


Douglas, Dick
Roberts, Albert (Normanton)


Dubs, Alfred
Roberts, Ernest (Hackney N)


Duffy, A. E. P.
Robertson, George


Eadie, Alex
Robinson, G. (Coventry NW)


Eastham, Ken
Sandelson, Neville


Evans, John (Newton)
Sever, John


Ewing, Harry
Shore, Rt Hon Peter


Field, Frank
Silkin, Rt Hon J. (Deptford)


Fitch, Alan
Skinner, Dennis


Fletcher, L. R. (Ilkeston)
Snape, Peter


Fletcher, Ted (Darlington)
Soley, Clive



Ford, Ben
Spearing, Nigel


Forrester, John
Spriggs, Leslie


Foster, Derek
Stoddart, David


Foulkes, George
Summerskill, Hon Dr Shirley


Fraser, J. (Lamb'th, N'w'd)
Thorne, Stan (Preston South)


Garrett, John (Norwich S)
Torney, Tom



Garrett, W. E. (Wallsend)
Urwin, Rt Hon Tom


George, Bruce
Wainwright, E.(Dearne V)


Grant, George (Morpeth)
Watkins, David


Hamilton, James (Bothwell)
Weetch, Ken


Hamilton, W. W. (C'tral Fife)
Welsh, Michael


Hardy, Peter
Whitlock, William


Harrison, Rt Hon Walter
Wigley, Dafydd


Hart, Rt Hon Dame Judith
Williams, Rt Hon A.(S'sea W)


Haynes, Frank
Wilson, Gordon (Dundee E)


Heffer, Eric S.
Winnick, David


Holland, S. (L'b'th, Vauxh'll)
Wright, Sheila


Home Robertson, John
Young, David (Bolton E)


Hooley, Frank



Hoyle, Douglas

Tellers for the Ayes:


Hughes, Robert (Aberdeen N)
Mr. Frank R. White and


John, Brynmor
Mr. Allen McKay.

NOES



Alexander, Richard
Higgins, Rt Hon Terence L.


Alton, David
Hill, James


Ancram, Michael
Holland, Philip (Carlton)


Aspinwall, Jack
Hordern, Peter


Atkins, Rt Hon H.(S'thorne)
Hunt, David (Wirral)


Baker, Nicholas (N Dorset)
Hunt, John (Ravensbourne)


Banks, Robert
Jenkin, Rt Hon Patrick


Beaumont-Dark, Anthony
Jopling, Rt Hon Michael


Beith, A. J.
Kershaw, Sir Anthony


Bendall, Vivian
King, Rt Hon Tom


Bennett, Sir Frederic (T'bay)
Kitson, Sir Timothy


Benyon, Thomas (A'don)
Knight, Mrs Jill


Benyon, W. (Buckingham)
Lamont, Norman


Berry, Hon Anthony
Lee, John


Biffen, Rt Hon John
Le Marchant, Spencer


Biggs-Davison, Sir John
Lennox-Boyd, Hon Mark


Blackburn, John
Lloyd, Peter (Fareham)


Blaker, Peter
Lyell, Nicholas


Bonsor, Sir Nicholas
Macfarlane, Neil


Boscawen, Hon Robert
MacGregor, John


Boyson, Dr Rhodes
Macmillan, Rt Hon M.


Braine, Sir Bernard
Major, John


Bright, Graham
Marland, Paul


Brinton, Tim
Marlow, Antony


Britten, Rt. Hon. Leon
Mather, Carol


Brown, Michael(Brigg &amp; Sc'n)
Maude, Rt Hon Sir Angus


Bruce-Gardyne, John
Mawhinney, Dr Brian


Bryan, Sir Paul
Maxwell-Hyslop, Robin


Budgen, Nick
Mellor, David


Bulmer, Esmond
Miller, Hal (B'grove)


Burden, Sir Frederick
Mills, Iain (Meriden)


Cadbury, Jocelyn
Moate, Roger


Carlisle, John (Luton West)
Monro, Sir Hector


Carlisle, Kenneth (Lincoln)
Montgomery, Fergus


Carlisle, Rt Hon M. (R'c'n )
Morgan, Geraint


Chalker, Mrs. Lynda
Morrison, Hon C. (Devizes)


Chapman, Sydney
Morrison, Hon P. (Chester)


Churchill, W. S.
Mudd, David


Clark, Hon A. (Plym'th, S'n)
Murphy, Christopher


Clarke, Kenneth (Rushcliffe)
Myles, David


Clegg, Sir Walter
Neale, Gerrard


Cope, John
Needham, Richard


Cranborne, Viscount
Nelson, Anthony


Critchley, Julian
Newton, Tony


Crouch, David
Osborn, John



Dorrell, Stephen
Page, John (Harrow, West)


Dover, Denshore
Page, Richard (SW Herts)


Edwards, Rt Hon N. (P'broke)
Patten, Christopher (Bath)


Elliott, Sir William
Pattie, Geoffrey


Eyre, Reginald
Pawsey, James


Fairgrieve, Sir Russell
Penhaligon, David


Faith, Mrs Sheila
Percival, Sir Ian


Fenner, Mrs Peggy
Pollock, Alexander


Finsberg, Geoffrey
Prentice, Rt Hon Reg


Fletcher, A. (Ed'nb'gh N)
Proctor, K. Harvey


Fletcher-Cooke, Sir Charles
Raison, Timothy


Forman, Nigel
Rathbone, Tim


Fox, Marcus
Rees, Peter (Dover and Deal)


Fraser, Peter (South Angus)
Rees-Davies, W. R.


Gardiner, George (Reigate)
Rhodes James, Robert


Garel-Jones, Tristan
Rhys Williams, Sir Brandon


Goodhew, Victor
Rifkind, Malcolm


Gorst, John
Roberts, M. (Cardiff NW)


Gow, Ian
Roberts, Wyn (Conway)


Gower, Sir Raymond
Rossi, Hugh


Gray, Hamish
Royle, Sir Anthony


Greenway, Harry
Sainsbury, Hon Timothy


Griffiths, E.(B'y St. Edm'ds)
St. John-Stevas, Rt Hon N.


Griffiths, Peter Portsm'th N)
Shaw, Giles (Pudsey)


Grimond, Rt Hon J.
Shaw, Michael (Scarborough)


Grist, Ian
Shelton, William (Streatham)


Gummer, John Selwyn
Shepherd, Colin (Hereford)


Hamilton, Michael (Salisbury)
Shersby, Michael


Hampson, Dr Keith
Silvester, Fred


Haselhurst, Alan
Skeet, T. H. H.


Hawkins, Paul
Smith, Dudley


Hawksley, Warren
Speed, Keith


Hayhoe, Barney
Speller, Tony


Henderson, Barry
Spence, John



Spicer, Jim (West Dorset)
Wakeham, John


Squire, Robin
Waldegrave, Hon William


Stainton, Keith
Walker, B. (Perth)


Stanbrook, Ivor
Walker-Smith, Rt Hon Sir D.


Stanley, John
Wall, Sir Patrick


Stevens, Martin
Waller, Gary


Stewart, A.(E Renfrewshire)
Warren, Kenneth


Stokes, John
Watson, John


Tapsell, Peter
Wells, John (Maidstone)


Tebbit, Rt Hon Norman
Wells, Bowen


Temple-Morris, Peter
Wheeler, John


Thatcher, Rt Hon Mrs M.
Wickenden, Keith


Thomas, Rt Hon Peter
Williams, D.(Montgomery)


Thompson, Donald
Winterton, Nicholas


Thornton, Malcolm
Wolfson, Mark


Townsend, Cyril D, (B'heath)
Young, Sir George (Acton)


Trippier, David



Trotter, Neville
Tellers for the Noes:


Vaughan, Dr Gerard
Mr. Peter Brooke and


Viggers, Peter
Mr. Alastair Goodlad.


Waddington, David

Question accordingly negatived.

New clause 5

MEETINGS OF CREDITORS AND centerBINDING

'(1) In section 293 of the 1948 Act (meeting of creditors) the following subsection shall be inserted after subsection (5):—

"(5)(A) No resolution passed by the company shall be valid unless endorsed by a meeting of the creditors held in pursuance of subsection (1) of this section."

(2) In section 293(6) for the words from "the company, directors or director" to the end of the subsection there shall be substituted:—

the company shall be liable on conviction on indictment to a fine; and on summary conviction to a fine not exceeding one thousand pounds; and
the director or directors, as the case may be, shall be liable on conviction on indictment to a term of imprisonment not exceeding two years or a fine, or both; and on summary conviction to a term of imprisonment not exceeding six months, or a fine not exceeding one thousand pounds, or both".'.—[Mr. Clinton Davis.]

Brought up, and read the First time.

Mr. Clinton Davis: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this we shall discuss new clause 32—Minimum notice of meeting for voluntary winding up.

Mr. Davis: New clause 5 deals with the esoterically entitled centerbinds. We are seeking to deal with an abuse which has continued for a considerable time. I concede that it is the subject of detailed investigation by the committee led by Sir Kenneth Cork. I am sure that he will not take offence if we make some progress. I do not believe that we would be pre-empting his conclusions in any material way.
Something must be done to remedy an abuse which has gained some attention, particularly in the "Checkpoint" programme in the last year.
I wish to deal briefly with how the abuse developed. It originated with a case called Re centerbind Limited which came before the Chancery Division in 1966 and was dealt with by Mr. Justice Plowman. I read the headnote of the case in Committee. I think it important for the sake of completeness to read it again. It said:
The shareholders in a company, who were three in number, accepted short notice for an extraordinary general meeting of the company to be held on the following day, when an extraordinary resolution for winding-up was passed and the


applicant was appointed liquidator. No declaration of solvency had been made; and no meeting of creditors had been held, but a creditors' voluntary winding-up was contemplated. The applicant forthwith launched a motion for an order staying further proceedings on a distress levied by the respondents, the Commissioners of Inland Revenue. On the question whether the applicant had locus standi to bring the motion or whether his purported appointment as liquidator was a nullity by reason of section 294 and section 293(1) of the Companies Act 1948, it was held that the applicant having been nominated or appointed liquidator by the members of the company became liquidator and, the creditors not having brought his appointment to an end, he had locus standi to bring the motion".
The result of that case led to the development of the technique of centerbinding.
There is a penalty to deal with the abuse set at a maximum of £1,000 on summary trial, but that has been the case only since 1980. Before that it was £100. The abuse is represented by the fact that, if 95 per cent. of the shareholders of a company call an extraordinary general meeting of shareholders, they can declare a creditors' voluntary liquidation—although, significantly, no creditors are present—but cannot call a members' voluntary winding-up as that would require them to make a declaration of solvency. That is why they do not do that. The shareholders can appoint a liquidator at once and ask him to liquidate the company.
It is true that the 1948 Act requires a creditors' meeting to be called within 24 hours, and failure to do so carries a maximum fine of £1,000 on summary trial. As far as I know, there are no examples of any trials on indictment. The person appointed liquidator still remains in that position, even if a breach of the criminal law has been committed. The mischief is that he can dispose of whatever assets he wishes at whatever price he thinks appropriate, and that is that. That can include, and has done in past practice, the selling of the principal assets to associates of the shareholders. A new company is established in exactly the same premises, with the same directors and other personnel who were behind the original company. Although it is true that any subsequent creditors' meeting, if one is called, can overthrow the appointment of the liquidator, the damage has already been done. It is a sad state of affairs that large private banks have condoned such action in consideration of the settlement of a secured loan. It represents a means to advance ahead of Crown preference and other creditors. It does not reflect well on the banks that have been involved in such a practice.
I understand that the Department of Trade has carried out some investigations into a well-known centerbinder, Mr. Maurice Sidney Caplan, who is known as Hissing Sid. His company, Chancery Lane Registrars Limited, proclaims to be a liquidation specialist. It is run by Mr. Caplan and two associates, Mr. Paul Davies—a solicitor—and a gentleman who purports to be something of an accountant, Mr. Stephen Willard Pepler. These gentlemen have some extraordinary qualifications to be involved in affairs of this sort.
Mr. Caplan was involved in nine business ventures which ended in bankruptcy. He personally has been bankrupt. He has served two prison terms for handling stolen goods and for defrauding his creditors. I suppose that that qualifies him uniquely to carry on such a form of business. 

9.45 pm
Mr. Pepler was involved in the David Lion mortgage and finance group, which came to an ignominious end. He served 18 months' imprisonment for defrauding five banks.
Mr. Davies does not emerge all that well. He has been fined £1,000 for uttering a forged document.
I gather from some inquiries made by The Sunday Times that all three gentlemen assured a reporter of The Sunday Times that they were now going straight. There we have it. The interesting feature about Hissing Sid is that he claims that he has all the answers to these problems. He says that he knows his way round the Bankruptcy Act. His firm's speciality is the centerbind version of the creditors' voluntary liquidation.
The clients that it acquires are usually provincial family businesses. It is fair to say that they have welcomed the attentions of Mr. Caplan—Hissing Sid and his associates. Once Chancery gets in, it checks the books. If it finds that the client is insolvent, it warns him that he is committing a criminal offence by continuing to trade and urges him to convene an immediate meeting to declare a creditors' voluntary liquidation and to appoint Chancery Lane Registrars Ltd. as the liquidators.
Mr. Caplan says that everything is legal and above board. He is reported as saying that he knows the insolvency laws backwards and that they are so loose and flexible that his firm can drive a coach and horses through them.
That sort of conduct must end. A great deal of damage is being done by those who have rejoiced in the abuse of company law and of the laws on insolvency. I know that the Government have some hesitation about new clause 5. I hoped that they would be prepared to be more ambitious. However, I have reason to believe that they will be prepared to support new clause 32. We must be thankful for small mercies.
I hope that the Government will ensure that when the Cork report is published—I hope that will not be too long now—they will embark on legislation. There are many abuses beyond those which I have catalogued which need to be dealt with urgently. I hope that the Government will make a better shot at that legislation than they have in the Bill. However, I must not be churlish, because I believe that they are prepared to accept new clause 32.
The clause overcomes some of the difficulties to which I have alluded. It would require a company to give at least seven days' notice of the meeting at which the winding-up resolution was to be proposed, and failure to comply would represent a criminal offence. The effect would be that the creditors would receive at least seven—possibly eight—days' notice of the meeting. That should give them time to consider whether they wish to nominate a liquidator or to attend the meeting.
It is possible that some difficulties could arise from opting for that course, but we must look at where the greatest benefit lies. I am convinced that the new clause would provide greater benefit and protection to creditors. I hope that the Government will accept the clause and that the Minister will be able to give us the assurances about the broader aspects of insolvency law that I requested a moment ago.

Mr. Eyre: The hon. Member for Hackney, Central (Mr. Davis) has set down two new clauses which propose alternative methods of strengthening the powers of


creditors in a creditors' voluntary winding-up. It is sensible to deal with both at the same time. In Committee I said that it would be preferable to await the outcome of public discussion of and consultation on the recommendations of the Insolvency Law Review Committee before considering changes in the voluntary liquidation practice.
The hon. Member for Hackney, Central emphasised the complexity of these matters when he referred to the activities of Hissing Sid. That complexity makes effective change essential. Like the hon. Member, I look forward to the report of the Insolvency Law Review Committee under the chairmanship of Sir Kenneth Cork. An intensive period of consultation will follow because it is essential to get those matters right. We will then certainly wish to deal with those matters in a proper and comprehensive way. I said that in the meantime I would look favourably on any procedural improvements that were proposed.
The principle of the Companies Act 1948 provisions is that creditors should have immediate notice of the company's intention to wind up and appoint a liquidator. Section 293 requires the company to advertise the convening of the creditors' meeting to take place on the day or the day next following the members' meeting. Section 294 provides for the creditors' nominee to be appointed as liquidator in the event of the creditors and the members appointing different people. I recognise that problems arise when the company resolves to wind up at short notice, and there is concern about possible abuses of this procedure.
The difficulty with the new clause 5 approach is that if creditors fail to endorse the company's resolutions or nominate their own liquidator, the company would be left in a state of limbo, which would defeat the object of the exercise. New clause 32, however, solves the problem of short notice by requiring the company to give at least seven days' notice of the meeting at which the winding-up resolution is to be proposed. I am glad to accept it.
I share the concern of the hon. Member for Hackney, Central about defaulting directors, but I cannot go so far as to recommend imprisonment as a penalty for directors who fail to comply with the provisions for calling meetings. However, I trust that the publicity generated by the discussions here and in another place will make creditors aware of their rights and company directors aware of the financial penalties which they may suffer if they fail to carry out their statutory obligations when holding those meetings.

Mr. Clinton Davis: I accept what the Minister says about imprisonment being an inappropriate sanction. In the overwhelming majority of cases it is simply a breach of duty in failing to call a meeting. Would not the Minister consider that all the circumstances must be taken into account and that where a fraudulent purpose has been demonstrated perhaps imprisonment would not be an inappropriate sanction?

Mr. Eyre: I agree with that, but the hon. Gentleman knows that it would be necessary to establish the element of fraud and to incorporate it in the definition of the offence. These matters are complex and ought to be dealt with comprehensively. That is one of the major purposes of the Cork review and I look forward very much to dealing with this problem properly.

Mr. Clinton Davis: When?

Mr. Eyre: I saw Sir Kenneth and he tells me that the committee will be reporting very shortly. I ask the hon. Gentleman, in the light of my remarks, to ask leave to withdraw new clause 5. He has made a very useful contribution by the argument that he has developed on new clause 32, and I recommmend the House to accept that clause. I assure the hon. Gentleman of my earnest desire properly to get to grips with the problem in an approach based on the Cork committee's report.

Mr. Trotter: Does my hon. Friend appreciate that if the law is changed in this way, on a one-off basis, without waiting for the Cork report, there may be some cases where the creditors of the company will suffer? There are cases where it is very much in the interests of the general body of the creditors for the company to be put into immediate liquidation. The law at present does not provide for that, and the new clause would bring in, under clause 32, a delay of seven days rather than the present 14 days.
There will be cases where the ability in future to bring a company into immediate liquidation will cause loss to the creditors, and I would have hoped that it could be considered in a more leisurely way in the light of the general findings of the Cork committee, because it is a very technical insolvency matter. I know that the House is seeking to avoid cases where shady business is carried out so speedily that the assets have disappeared from view before any proper hold on them can be obtained by the properly appointed liquidator. These cases are very rare, but there are at least as many cases where there is a need for immediate action if the assets of the company are to be saved. I hope that my hon. Friend will bear that in mind.

Mr. Eyre: The remarks of my hon. Friend the Member for Tynemouth (Mr. Trotter) illustrate the difficulties of these matters. As one sits at the center in the Department, receiving advice from people such as my hon. Friend, who are experts in the subject, one finds that there is a conflict of opinion and of evidence. I have noted what my hon. Friend said on behalf of those companies which need to take speedy action to allow them to go into voluntary liquidation quickly in order to preserve something for the creditiors. I am inclined to the view that cases where seven days' notice is too long will be so few that it would be wrong to reject these new proposals to protect creditors' interests in order to preserve a right that will need to be used only infrequently.
I ask my hon. Friend to bear with me, because I have considered very carefully all aspects of this matter. I know that I cannot please everyone, but that is the balance that I propose to take. I think that it is fair and reasonable. I ask hon. Members to take account of these arguments, because we are in very deep waters here and I am trying to find the right balance.

Mr. Trotter: One of the practical effects is that the Inland Revenue authorities rather than the ordinary creditors can get their hands on the assets. Whether that is what the Opposition are seeking I very much doubt, but that would be the practical effect of the new clause. I suggest that the cases in which assets disappear improperly through this sort of action are at least as infrequent as the cases in which speedy action is needed.

Mr. Eyre: I hesitate to differ from my hon. Friend, because I know of his great practical experience in these


matters, but these cases have been carefully reviewed. I have to strike the best balance that I can in the public interest. I assure my hon. Friend that, difficult though it is, I have tried to do that. There is no perfect solution. We need a comprehensive review, but the balance of advantage, in the public interest, is the one that I have indicated, and I ask my hon. Friend to accept that I have given very careful consideration to the point that he made

Mr. Clinton Davis: Unlike his hon. Friend the Member for Tynemouth (Mr. Trotter), I am prepared, although I could think of a better verb, to bear with the Minister on this. It is indeed a question of balance. The Minister, with his officials and others, has clearly looked at the nature of the abuse and has had to balance it against the possible harm that could flow to, I believe, a very small number of people. I believe that the Minister has made the correct judgment. Certainly, it is one that I support. Moreover, so far as I know, no strong representations have been made by the accountancy bodies against the proposal since it has been on the Amendment Paper.
It being Ten o'clock, the debate stood adjourned.
Ordered,
That, at this day's sitting, the Companies (No. 2) Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr Brooke.]
Question again proposed, That the clause be read a Second time.

Mr. Clinton Davis: Having said that, I beg to ask leave to withdraw the new clause.
Motion and clause, by leave, withdrawn.

New Clause 6

COMMON OWNERSHIP COMPANIES

'A new class of company shall be created to be known as a "Common Ownership Company".
In such companies earnings shall accumulate on behalf of or be distributed to those contributing work instead of accumulating on behalf of and being distributed to those contributing the ordinary share capital.
Voting in such Common Ownership Companies shall be equal or in some way other than in proportion to shares held.
No bonus shares shall be issued to the members of such Common Ownership Companies in proportion to shareholdings except to such extent as may be necessary to offset inflation; but bonus shares may be issued to an unlimited extent in proportion to work.
On a winding up any residual assets of any such Common Ownership Company shall not be distributed to shareholders in proportion to shareholdings but may be distributed to members in proportion to work or be transferred to some non-profit or public organisation or to a charity.'.—[Mr. Geoffrey Robinson.]

Brought up, and read the First time.

Mr. Geoffrey Robinson: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take new clause 41—Job ownership companies.

Mr. Robinson: It will be to the immense relief, if not yet release, of the House to hear that we do not intend to press the new clause, in its present form, to a Division. I mentioned earlier that it was with the indulgence of my right hon. and hon. Friends that I was at the Dispatch Box. It can well be imagined that it is with their active encouragement that we air yet again an issue that we

believe needs to be ventilated in debate and, with regard to one particular incident in very recent times, needs attention drawn to it.
I know well what the Under-Secretary of State will say in reply and I have considerable sympathy with the position of the officials. I believe that the very flexibility of the present legislation has as many advantages as disadvantages. I say that without disregarding the complex new clause that I am sure the right hon. Member for Orkney and Shetland (Mr. Grimond) will introduce with his usual lucidity and originality of mind. I would not wish to follow him into every detail of that clause, which I am sure that he, too, will not wish to press to a Division today.
I am not sure that at this point we can do more than illustrate and draw attention to the principles involved, even in the complexities into which the right hon. Gentleman may have to go—although I hope that he will not—in introducing new clause 41.
We are saying that, given the growing importance of co-ownership and co-operation rather than confrontation in industry, there may at some future time be scope for wider legislation to facilitate that even more. At present, we have the Industrial Common Ownership Act, the Industrial and Provident Societies Acts, the Scott-Bader arrangements, the John Lewis Partnership, and, if I dare mention it—I shall not be tempted to do more than that—the unique arrangements of the Meriden co-operative. There is much to be said for the flexibility that allows all those various arrangements under the present law to be maintained.
In mentioning Meriden I repeat the tribute that I paid to the previous Minister of State, with whom we had the pleasure of dealing on these matters in Committee and outside, for his handling of the Meriden affair. I also congratulate him, in his absence, on his elevation to that central position on the platform as chairman of the Conservative Party, which he must have occupied with great pleasure, although I imagine that the proceedings on the Floor will have given him almost as much displeasure. I pay tribute to his realistic and sensitive handling of the Meriden affair, to the officials of the Export Credits Guarantee Department, with its outstanding staff of high commercial calibre, committed to the pursuit of the national interest—in which I hope that hon. Members in all parts of the House can still share—and to the officials in various Government Departments.
I belong to that dying breed of politician who happens to believe that officials are important in running the Government and that their co-operation is far better than their confrontation. Even when we had a Labour Government I sometimes found it easier to talk to the officials than to the Ministers concerned. Even though it may lead to a restriction on my parliamentary activities, I put that tribute on record. The Meriden co-operative, which exists under present legislation, intends to prove the Government wrong. I sincerely hope that it can.
Having said that, I return to the question of co-ownership and the need for co-operation in industry that co-ownership can involve. Labour Members feel strongly about this because of the dramatic and possibly disastrous confrontation that is about to take place in British Leyland.
It is not for me to advise the Government. Perhaps they have decided to pick on the beleaguered car workers as an example to everyone else. Nor is it for me to advise trade union leaders and their members about the crucial meeting that will probably take place in Coventry on Thursday. I


say that in the knowledge that I have my own reselection meeting on Wednesday night. I do not wish to advise those who are taking part in those discussions.
If ever a case demonstrated that co-operation rather than confrontation was required, and if ever a case demonstrated the need for co-ownership—the Government seem intent on getting into disastrous straits—it is surely that of British Leyland.
No doubt Sir Michael Edwardes sees this as yet another dramatic, headline-clinching confrontation and a subjugation of the opponents, but in the four years of his stewardship—even this year after the launch of the Mini Metro—the percentage market share of British Leyland vehicles has dropped. A total of £1.2 billion of public money has been committed to that company. Workers have not gone on strike for an unparalleled two years and have settled for 5 per cent. , 5 per cent. and 6.8 per cent. The result has been a record £500 million loss in 1980.
I do not attribute that to Sir Michael Edwardes. I attribute it almost exclusively to Government policy and the exchange rate. That argument is not central to my point, but, if Conservative Members wish me to do so, I shall be only too happy to argue the case.
We feel it appropriate to make this appeal because our new clause stresses the reality and the need to move towards co-ownership and co-operation in industry. On 16 October the Financial Times published the letter to the employees of BL, in which Sir Michael said:
The BL board will"—
I can only quote from a newspaper because I am not privy to the letter and have not been shown it by anyone who works in the company—
terminate the contracts of all strikers without payment or redundancy payments or payments in lieu of notice. It will not present its corporate plan to the Government".
The letter continues in terms of an ultimatum that is so absolute that it is an affront to those who have received it. No letter could have been better calculated in tone and content to get precisely the counter-productive response that it did.
In large and small industries alike, we must move towards co-ownership and co-operation and away from confrontation. It is for that reason that we are debating the new clause. For reasons that are obvious to all hon. Members we shall not push it to a Division, but this is a serious issue and it will become more serious. I urge the Government and Sir Michael carefully to consider the position into which they are unnecessarily getting themselves.

Mr. J. Grimond: I support new clause 6. I do not wish it to be thought that new clause 41 is in any way hostile to it, although the former is rather narrow. New clause 41 would possibly enable more companies to benefit.
I hope that the new clause in my name is not complicated. Its purpose is reasonably simple. It has been drafted by experts. There is a certain amount of urgency. First, industrial relations are not so good that we can afford to dismiss new forms of industrial organisation. Secondly, there is a favourable tide for co-operatives and management and work force takeovers and considerable interest in broadening the base of industry and giving workers a share in ownership and, therefore, to some extent in control. 

New clause 41 stems from proposals in another place by Lord Seebohm, and supported by Lords Caldecote, Boyd-Carpenter, Lloyd QC, Oram, Diamond and others—a formidable list of people who between them have considerable experience and expertise not only in industry but in law and accountancy.
The main object of the new clause is to establish a new form of company—a job ownership company. We hope that once established it would share in the tax advantages given to co-operatives and, as a type of co-operative, to common ownership enterprises as defined in the 1976 Act and in the recent Finance Bill. The concession allows co-operatives to share the tax relief granted to partnership and close companies. The cost of money borrowed by a worker to enable him to take up shares in his company can be set off against his income tax, which is a considerable concession. We hope that that will flow from the recognition of a job ownership company.
The clause has subordinate purposes. Safeguards are written in against abuse and there is a power for job ownership companies to hold their own shares. The definition of a job ownership company is given in subsections (2)(a) and (b). It is a company limited by shares and one in which all those working in it are entitled to take shares and of which only those who take shares are entitled to be members. Those definitions distinguish it from a co-operative.
Subsection (2)(c) excludes certain companies—those dealing with property, insurance and finance. That provision is inserted at the suggestion of the Treasury to avoid possible tax evasion. I regret the exclusion of banks. The Casa Laboral Popular is a key element in the successful group of Mondragon co-operatives, and I believe that the establishment of similar banks associated with local communities or groups of co-operative enterprises in this country is very much needed. However, we are aiming principally at facilitating the setting up of job ownership companies in productive industry and therefore accept the Treasury's fears that if property and finance companies are included there is a danger of the provision being used as a vehicle for tax evasion.
Subsection (2)(d) is inserted for the same reason—to meet Treasury fears of tax evasion.
Subsection (3) allows a job ownership company to hold its own shares in treasury. The significance of "in treasury" is that if the company buys in its own shares it will not be forced to cancel them. They will be available for reissue to new members. 
10.15 pm
I shall be asked why it is necessary to create another form of company. The answer, according to my advisers, who are distinguished and experienced people, is that for the type of suggestion now put forward widely the existing forms of company are not wholly suitable. The tax concessions in the recent Finance Bill really apply only to co-operatives or to common ownership companies as defined in the 1976 Act under which they are co-operatives. There are, of course, difficulties about co-operatives. The shares of co-operatives cannot appreciate in value. The only way in which members of co-operatives can share in the increased value of assets is through bonus shares, which, I understand, are liable to tax at the income tax level.
Another possibility is the close company. However, as a Treasury Minister has pointed out, a close company can


have only comparatively few members. It is unusual for it to have more than 20 members. We are considering a company in which all the work force would be members. Under existing legislation, a common ownership enterprise, as defined in the 1976 Act, requires not only registration by the registrar as a co-operative, but a certificate from a Minister, which can be withdrawn. It is evident from talking to people who contemplate changing their businesses into co-operatives or setting up new ones that these are unacceptable provisions.
The Mondragon type of co-operative in Spain has proved extremely successful. It is widely recognised as a structure from which we can learn. The Government themselves have encouraged the Welsh Trades Union Council to examine it. One of the features of such a co-operative is that members share in asset growth. This is extremely important for those who are thinking of putting their money into some sort of co-operative. A proportion of shares is held in common—that is, in treasury. I understand that under existing legislation this would not be possible in Britain. The Mondragon type of co-operative has been tested and examined by many people who are competent to fulfil that task. There are lessons that we can learn.
I confess at once that my new clause differs in one important respect from the Mondragon model. It does not insist that every member of the job ownership company should have one vote and one vote only. It does not insist that any profit should be distributed according to the work contributed by a particular member. I agree that this is a good principle. I believe that it is one of the main principles of new clause 6. I do not dissent from it. Hon. Members have been told, however, that in certain cases that are being actively pursued if this were rigorously applied it would be a bar to the companies making their work force into members of a job ownership company. Under subsection (2)(b) of my new clause it is possible for the job ownership company to lay down terms and conditions, among which might be the requirement of one vote per member and that profits should be shared according to the work put into the company.
The clause has not been thought up by theoreticians. It stems from work done by Lord Seebohm. It is drafted largely by lawyers under his direction. It is aimed at the management takeovers and the work force takeovers that are being discussed at the moment. I believe that some such development in our industrial structure is necessary if we are to improve productivity, contain inflation and get the better relations in industry that are so obviously needed.
One case that is being actively pursued is that of the National Freight Company, which is anxious to form a company in which the work force will control most, if not all, of the operation. The managing director, Mr. Thompson, has made it clear to us that if the only vehicle available is a co-operative it will be extremely difficult, if not impossible, to go forward with the idea. I see in tonight's newspaper that he is pushing on, and I am glad to see that. I do not deny that it could be done, but it would be difficult.
Manchester Cold Rollers has already been formed into what might be called a joint ownership company, but it employs few people and the title of a closed company is much more readily available to it than to a larger company in which all the work force are members. 

A conglomerate is anxious to hive off a company that it took over inadvisedly some years ago and is willing to sell it to its members for £1, but it is running into difficulties over the form of the takeover company.
One of the main reasons why I hope to get the Government to accept a new form of joint ownership company is that from that we can go on to define its relationship with taxation and other matters.
I know a man who employs 750 people and has made profits of between £3 million and £4 million a year for the past two years. He is anxious to involve his work force in the running of the company, but he finds that if he offers it to the work force at less than the market value, which he is willing to do and which is essential for the whole operation, he will have to pay an immense sum in capital transfer tax. Therefore, that operation is being held up and is before the Government. Once we have a definition of a company, it will be possible to legislate to get out of that sort of difficulty.
I urge the Government to consider new forms of industrial organisation. They seem to be the solution to the conflict that can lead to bad relations in some industries. I do not pretend that this is the only way in which industry should organise or that it is not theoretically possible, if one has enough accountants and so on, to get round the difficulties. However, my associates and I have practical experience of four or five new or existing companies that have run into difficulties because of the lack of a definition of a joint ownership company and are therefore facing problems in dealing with their tax and other liabilities.
New clause 6 is another way forward. It is rather more restrictive because it insists on one man, one vote and on distribution not according to the capital held by employees but to the work put in. Those are good principles, but they are more restrictive and in some cases would be thought to be an obstacle to the creation of such an industrial organisation.
I know that the Co-operative Development Agency is doing extremely good work, but it concentrates on co-operatives. I am sure that the Government agree that pure co-operatives are not the solution to the management or work force takeovers about which I am concerned. I hope that the Minister will consider my new clause and if the drafting is inadequate will not make that his reason for rejecting the whole idea.

Sir Brandon Rhys Williams: The right hon. and hon. Members who have tabled these new clauses have done us a service in raising a subject of growing importance. I have often sought to draw attention to the fact that the Companies Acts are based on practice in the creation of wealth which is rapidly becoming obsolete. It can be said to reflect the social division into Normans and Saxons of long ago. In our factories today there are still all too many managers playing the role of Normans and all too many members of the work force who think it appropriate to act as Saxons in an adversarial or at any rate an angry subordinate role.
With the coming of universal suffrage, such games are simply not appropriate and do not help either the management or the work force to make the best of their opportunities. We need to think again, particularly in the economic straits in which we find ourselves, about the best way of conducting businesses, both large and small, so as to ensure that all concerned give of their best and attain the best of which they are capable. 


It may be said that in this country, for reasons which I have been unable to analyse and do not wish to dwell on here, the development of the law in connection with partnership atrophied at about the end of the nineteenth century. It did not continue to develop in the immensely detailed and specific way that our company law did in relation to the operation of directors, shareholders and participants at all stages in companies of the kind that are publicly quoted on the Stock Exchange.
I wish to draw attention to a completely different system which still exists in this country and which is extremely fruitful, and that is the relationship between landlord and tenant on the land. In that relationship the owner takes a fixed return and the tenant and his wife, who are in effect the workers, take the profit and loss. Everyone knows what a happy relationship normally exists between agricultural landlord and tenant and how successful an enterprise British agriculture is, by and large. In normal public companies the relationship is reversed. There is an echo of the concepts of money barons and wage slaves, where the workers take a fixed return, whether the business is profitable or unprofitable, and the owners take the profit or the loss. The House should note that contrast, and I am glad that we have the opportunity to do so tonight.
I think that I am right in saying that before the war the finance of enterprise was largely derived from fixed interest securities such as debentures and preference shares, and that the equity branch of the capital structure of companies was, for the most part, much less important as a source of finance. However, with the developments of the past 10 years, particularly with the accelerating and uncertain rate of inflation, we have reached the stage where the cult of the equity has gone too far. Boards are under great pressure to find ways, legitimate or illegitimate, of meeting the expectations of investors, and at the same time the antagonism between the interests of workers and the interests of investors has become too painfully obvious. In my view, that antagonism is one which we all know is ruining our country, and yet we are not making sufficiently specific proposals to deal with the situation. In fact, it now appears that it is as bad as it has ever been.
Many companies would welcome a change in the way that the economic environment of our country permits private companies to finance their work. There are many companies whose directors are worried stiff about the extent to which they have become dependent on bank debt—that is to say, on capital commitments for the most part at fixed interest. They wish that they could find a way to cut free from their commitment to the bank, but market circumstances are such that they cannot contemplate in good faith issuing a prospectus with a view to raising money through equity participation. A solution that is beginning to be found is the selling off of the firm to the management.
That is an interesting development. This year, at the Report stage of the Finance Bill, I recommended that the Government should recognise a new class of stock, which I called the value added loan stock. The object would be to enable companies to sell forward not their equity but a fixed share of their value added as a source of finance. I hope that the Government will give this matter further consideration. Indeed, I have had an assurance that they

may do so in the forthcoming Green Paper on this subject. For tax purposes such shares should be ranked as debentures because, although they ride with inflation, they offer a fixed return to the investor. They should also be exempt from capital gains tax, because by their very nature they should increase in value year by year and should keep pace with changes in the value of money. 
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I have brought up this subject again because if a company went over to value added loan stocks and diminished or even ended its dependence on equity shares, it would turn into the type of company envisaged by those hon. Members and outside experts who are trying to devise a new method of organising company finance in order to reproduce on a large scale the benefits that exist in the small partnership operations that are permitted under the rudimentary state of our partnership law.
I envisage that companies will increasingly have to recognise that the uncertainties of inflation accounting, the effects of the recession trade union pressure and so on will mean that they will be unable to undertake to operate at a profit. However, they may know that intrinsically their businesses are sound and that they have a good market share. They may also know that their work forces are competent and that their capital is not necessarily obsolete. How can they continue unless we make it easy for them to develop into partnerships and to solve their social and financial problems at the same time?
I hope that the Government will consider the merit behind the new clauses. Although the proposers do not intend to divide the House, I hope that it will not be thought that they could not enlist any support. We must move forward to what the Italians call the "historic compromise". In British terms, the investors will have to be ready to take a fair return and to refrain from insisting that they should have all the profits. In return, the employees must accept the responsibilities of partnership and renounce the right to strike.

Mr. Eyre: I cannot take up the industrial wonderings offered by the hon. Member for Coventry, North-West (Mr. Robinson), which seemed to be aimed at his reselection meeting on Wednesday. However, I regret to inform him that I do not depart from the general view put forward by the Government in Committee, namely, that we do not believe that the proposals further the cause of common ownership companies in the way that the Opposition intend.
As some hon. Members will recall, in Committee the Government expressed support for the aims to which the hon. Gentleman referred, namely, of stimulating productive activity and enterprise in as wide a variety of forms as possible. I assure my hon. Friend the Member for Kensington (Sir B. Rhys Williams) that that is so, and that the Government have an open approach to such forms of activity and wish to see progress. We are doing what we can to create a framework in which such enterprise can be encouraged, and the Companies Bill will help by providing for accounting exemptions for small companies and by enabling a company to buy its own shares.
I should like to underline, however, that the present code of company law in Britain affords great flexibility over the constitution of new companies and that, so long as certain conditions are met, matters such as the eligibility to hold shares, rights on voting, appointment of directors and distribution of dividends are deliberately left for the


members of the company to determine in their articles of association. There is, therefore, no need for a specific provision for common ownership companies. Indeed, the new clause might well restrict the freedom of common ownership companies to develop. If their constitutions were now to be determined by statute it might be found after a time that desirable innovations were frustrated and that it would have been wiser to leave the subject to the more flexible provision of the general body of company law.
In Committee I tried to set out the case for that view in greater detail. We wish the hon. Member for Coventry, North-West well in the development of such organisations, but they are well able to develop under the existing company law structure.
I turn to new clause 41. I congratulate the right hon. Member for Orkney and Shetland (Mr. Grimond) on the way in which he advocated the merits of the job ownership company. I warmed to his argument when he explained that concept. Job ownership companies might encourage more people to participate in the process of creating wealth, whether by the establishment of new businesses owned and run by their employees or by the reconstruction of existing businesses. I was interested in the right hon. Gentleman's argument in that connection.
It appears that producer co-operatives play a smaller part in the British economy than in the economies of some of our neighbours. The job ownership idea is one way of helping to fill the gap. I believe that it has an important role to play because although, like other producer co-operative models, it does not permit outside equity, it has the advantage of allowing employees to take an equity stake in their company whilst maintaining the principle of equal voting rights.
Our policy is to encourage such experiments in industrial co-ownership. I stress that because I know that it will please my hon. Friend the Member for Kensington, who is also a disciple in this sphere.
This particular model is scarcely well tried in the British environment, but we are happy to give it our encouragement. We therefore stand ready to help spread the good word about job opportunity companies. I shall describe later how we propose to do that.
I am sure that the clause should not be included in the Bill. It would introduce a definition of a JOC into company law. It is claimed that there are two purposes for that, both of which are misconceived.
I wish to dwell on the crucial point of seeking to insert into statute a definition of a JOC. It is argued that the adoption of the JOC form would be helped by statutory recognition. Faith in the evangelical effects of statute law is misplaced. A statutory definition could easily become a straitjacket by casting permanently the JOC in the mould in which it is described in new clause 41, while various adjustments to the definition would become desirable in the light of experience.
I recall the words of Lord Mackay, the Lord Advocate, who, with his usual precise turn of phrase, said that such a definition would be "frozen into statute." Subsequent developments have shown how right he was. I ask the right hon. Member for Orkney and Shetland to bear with me while I quote the evidence that I believe supports my view, but with great respect to the concept that he has in mind.
The definition before the House—I shall call it mark III—differs substantially from that put before another place—mark I—and from that which was withdrawn from

the Order Paper only last week—mark II. The two earlier versions differ from each other. Mark III, before us now, would restrict membership to those working in a company. Mark I would have limited membership to individuals bona fide employed by, or whose income was substantially derived from working upon the business of, the company or its subsidiaries, and also to trustees of an employees' share scheme or charity. Mark II, however, omitted the reference to charity. Both earlier versions prohibited the alteration of the membership provisions.
The right hon. Gentleman said that he was advised that existing forms of company were not suitable for his purpose, but he did not identify a single company law impediment to the formation and operation of such a company, with the exception of the prohibition on "in treasury" shares, which I shall deal with in a moment, as it is of specialised interest.

Mr. Grimond: I am grateful to the Minister. I am closely following his remarks. I agree that we have modified our proposals and tried to make them simpler. The difficulty is that the matter falls between company law and finance law. When I put forward proposals during the proceedings on the Finance Bill I was told that it was a matter for company law. When talking to people who want to form such an operation, we find that the great drawback is that they cannot gain the tax advantages. If they formed a co-operative they could settle the cost of borrowing the money for their shares against their tax. For obvious reasons, a co-operative is unsuitable to take over the National Freight Corporation. The drawback is the question not simply of Treasury shares but of tax.

Mr. Eyre: The right hon. Gentleman and his friends are striving to find a suitable definition for their purposes. With respect, more than one definition may be suitable for different purposes. The struggle to find the one perfect answer causes the solution to fall between different stools. There is no single company law impediment to the formation and operation of the sort of company to which the right hon. Gentleman referred, except for the Treasury share difficulty that I shall explain frankly.
The right hon. Gentleman's claim for consideration is really addressed to the Treasury. I am not seeking to avoid his questions in any way. If he and his friends contrived a definition of precisely the form of activities, the qualities, the virtues and the advantages that they wish to encompass in their company, they would have a firm base on which to approach the Treasury. They could form that base in relation to existing company law.

Mr. Grimond: When we approach the Treasury it says that we must go away and talk to the Department of Trade, get a definition of a company, and then come back. We are going backwards and forwards between the Treasury and the Department of Trade.

Mr. Eyre: I shall make what I hope the right hon. Gentleman will regard as a helpful approach on the part of the Department of Trade. I say that he is able to form the organisation that he has in mind within the existing provisions of company law. The right hon. Gentleman and his hon. Friends would have to decide what virtues they wished to incorporate within that pattern. They would be able to form a company and they would then seek to ask for special consideration on the taxation side, which would


be a Treasury matter. I shall explain the positive steps that we shall take in the Department to assist the right hon. Gentleman in his concept where we agree with him. We wish to be helpful.
I turn to the introduction in the present version of a qualification to the right that workers have to become members in subsection (2)(b)(ii) of new clause 41. This permits the board to lay down terms and conditions of membership, which I suggest would be a wide-sweeping power which would be capable of excluding persons other than those favoured by the board. This is the more interesting because, unlike its antecedents, mark III has no provision for allocating one vote to each member irrespective of the size of shareholding, which I understand is a most important co-operative principle. This alteration makes me wonder not so much whether the chameleon has changed colour but whether it is still a chameleon at all. I am reinforced in that reflection by the fact that, unlike its forebears, the latest version is silent on the question whether loans whose return is linked to profits should be permitted and on how directors should be appointed.
Some of the changes appear to introduce greater flexibility of organisation and ability to attract outside finance, which may be sensible as they may enable companies to take advantage of such flexibility to withstand the vicissitudes of fortune better than if the situation were more restricted. That endorses our view that the JOC idea is still evolving. It is one which no doubt will be capable of further improvement. It would be a mistake to frustrate such development by introducing a statutory definition.
I shall deal with the effect that a definition of a JOC would serve in terms of other provisions in the law. There have been a number of changes. Mark I, which was discussed in another place, would have enabled JOCs to purchase their own shares. I believe that it is accepted that the Bill's provisions will remove any obstacles to the establishment of JOCs on this account. Therefore, we improve the situation. It also permitted JOCs to hold any shares so purchased in treasury. Mark II would have permitted them to issue no par value shares. No evidence has been forwarded that JOCs cannot operate successfully, as do the generality of companies, with the use of shares of some nominal value.
Mark III provides that a JOC shall be entitled to hold its shares in treasury—namely, to purchase shares without cancelling them. In our provisions in the Bill on the purchase by a company of its own shares, we require that shares so purchased shall be cancelled. If more are subsequently needed, they will come from a fresh issue. If treasury shares were permitted, accounting procedure would have to be devised so that the balance sheet of the company could reflect the capital available to creditors, taking account of the shares held in treasury but covered by reserve. This would necessitate inevitably complicated additions to the statute book. Our approach is simpler and perfectly well suited to the circumstances of JOCs.
Further complex provisions would also be needed to cover problems arising on the reissue of treasury shares. Ought the rules in the Companies Acts on allotment at a discount, valuation of non-cash consideration received and share premium to apply to the reissue? Ought the rules on shareholders' pre-emption to apply as if the reissue were

an allotment? I will not trouble the House with all the ramifications of those difficult questions. They would all need to be dealt with, but the great beauty of our approach is that they do not need to be. The provisions of the Bill providing for cancellation, combined with the rule in clauses 43 and 44 that the authorised capital remains intact on purchase and redemption, ensure that all the advantages of treasury shares are already conferred by the Bill, with none of the novel and complex problems that this proposal would raise.
Therefore, I appeal to the House to support our approach and the decisions which we have made about the non-eligibility of treasury shares on grounds of economy and efficiency, which should benefit all concerned—industry, commerce and the professions.
At this stage I should like to thank again my hon. Friend the Member for Kensington for his interesting speech. I shall consider carefully all the aspects of the approach that he advocates. I understand his enthusiasm for his beliefs.
I now turn to the help that the Government have offered to job ownership. I hope that the right hon. Member for Orkney and Shetland will accept that we want to help. We believe that effective publicity for the concept is important. We are ready to ensure that the JOC idea is brought to the attention of those Government Departments and their related organisations throughout the country which deal with the promotion of industrial and commercial development. They will therefore be able to bear its advantages in mind in the context of the variety of individual cases with which they deal. This is a serious offer of help, which we believe will do far more for the dissemination and implementation of the JOC concept than so-called recognition in company law.
My officials understand that a set of model articles of a JOC will shortly be sent to the Department. They will then be able to get ahead with the job of publicity. I assure the right hon. Member for Orkney and Shetland that I look forward to the arrival of the model articles. We will actively promote the concept that he champions.
That offer of help, made by the Government after the initial debate on the matter in the other place, should satisfy the reasonable and praiseworthy ambitions of the right hon. Member for Orkney and Shetland. He has an imaginative idea. I recommend our response to the House as an appropriately constructive one. However, the incorporation of this clause into the Bill would, for the reasons that I have given, be a source of confusion to those wishing to form such companies and a disservice to the job ownership movement. I hope that the right hon. Member will find my remarks, and also my promise of co-operation, helpful.
I have dealt with most of the points that have been raised. I have stated our attitude to the right hon. Member for Orkney and Shetland and to the hon. Member for Coventry, North-West. I hope that on examination they will find that I have developed reasonable arguments in answer to their points.
Question put and negatived.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): We now come to new clause 14, with which it will be convenient to take new clause 15.

Sir Brandon Rhys Williams: On a point of order, Mr. Deputy Speaker. If it is for the convenience of the House I shall be content not to move new clause 14 tonight, but that is a matter for the House to decide.

Mr. Deputy Speaker: The hon. Gentleman must indicate what he is doing.

Sir Brandon Rhys Williams: I was under the impression that earlier clauses had to be taken before new clause 14 and that the matter might be discussed through the usual channels for the convenience of all concerned. I thought that as a matter of courtesy I should mention this before opening the debate on my new clauses.

Mr. Clinton Davis: On a point of order, Mr. Deputy Speaker. I think that I know what might have misled the hon. Member for Kensington (Sir B. Rhys Williams). New clauses 9, 10 and 11 are on the selection list, but I had no intention tonight of moving them.
While I am on my feet, I invite the Minister to say whether he would be prepared to move the adjournment of the proceedings at this stage, because the new clauses that the hon. Member for Kensington has tabled, dealing with audit committees, are of some substance. We are virtually at the end of the new clauses. It is not my intention to move new clause 39, and the debate on new clause 40 will be very short, so that we have almost completed the new clauses. I know that the Minister and I had agreed that we should finish the new clauses tonight, but I am wondering whether, in fairness to the hon. Member for Kensington, we might postpone the debate on new clauses 14 and 15 until tomorrow. We are at a fairly late hour and I am not sure that we can do justice to them at this stage.

Mr. Eyre: I apologise to the House for my apparent uncertainty, but I was expecting that new clauses 9, 10 and 11 would be moved, although the hon. Member for Hackney, Central (Mr. Davis) had indicated to me that he might withdraw them. I am grateful to him for saying that he has decided not to pursue those new clauses and that he is also not pursuing new clause 39.
I find myself in some difficulty, however. The Bill is a long and technical one. The hon. Member knows and understands that as well as anyone. I have an enormous number of amendments with which I have to deal tomorrow, and it would be extremely difficult for me if we did not get enough time to deal with them. It could be to the detriment of those essential parts of the Bill. I know that the hon. Member would not begin to reproach me tomorrow night if we had to plough on until the late hours, but that is the difficulty that I face. It might be necessary to sit very late tomorrow night in order to deal adequately with the business.
I should be extremely interested to hear the argument of my hon. Friend the Member for Kensington (Sir B. Rhys Williams) as I was informed that he wished to speak today. A message arrived for me saying that my hon. Friend wished to speak today, and I have in part organised the business on that basis. I gathered that that was the wish of my hon. Friend, and I have tried to operate accordingly.

Sir Brandon Rhys Williams: I may have been the cause of misunderstanding, in that I said that I had no particular wish to raise these very technical questions in what might be regarded as the prime time of the House, when hon. Members come to the Report stage again after Question Time tomorrow. I am perfectly happy to be guided by consensus as to whether I move the new clauses now or whether we leave them until tomorrow.

11 pm

Mr. Clinton Davis: Further to that point of order, Mr. Deputy Speaker. Perhaps I can be of assistance to the Minister. As I have indicated, I shall leave the matter in his hands. I do not think that the job tomorrow is as formidable as he thinks. We shall have some controversy on the first two amendments, but after that it will be fairly plain sailing. I doubt very much whether there will be much intervention on my part or on the part of other Labour Members. I hope that I am not being over-optimistic.

Mr. Eyre: I am grateful to the hon. Gentleman. I appreciate the assurance about his performance tomorrow, but the view among my hon. Friends is that they are anxious to hear my hon. Friend's speech. As my hon. Friend knows, I am prepared to discuss this at any time, and we enjoy listening to his speeches on these matters.

Sir Brandon Rhys Williams: The consensus seems to point in the direction of my moving new clause 14.

New clause 14

Appointment of an audit committee to be considered

'(1) The agenda of every annual general meeting of a major public company as defined in subsection (2) of this section shall include as a separate item consideration of the appointment of an audit committee of the board.

(2) For the purpose of this section a major public company shall be a company registered in Great Britain whose shares are listed on a recognised stock exchange, if within a period of five years ending on the last day of its last accounting reference period, being a day not more than twelve months after the appointed day,—

the amount of the turnover of the company in any accounting reference period of the company exceeded £200 million, or
 the balance sheet total of the company (determined in accordance with the provisions of section 8 of this Act) at any time exceeded £400 million or
the number of employees of the company (being full-time employees of the company or any subsidiary company thereof) exceeded 50,000'.—[Sir Brandon Rhys Williams.]

Brought up, and read the First time.

Sir Brandon Rhys Williams: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this we may discuss new clause 15—Constitution and function of an audit committee.

Sir Brandon Rhys Williams: My points need not be too long drawn out. This is not the first time that I have had the opportunity to raise these proposals in the House. In fact, on more than one occasion I have had the leave of the House to introduce a Bill which included this series of recommendations.
The style of management and the constitution of the board of public companies has moved on considerably since the great 1948 Companies Act which enshrined the wisdom of many experts on company law over the previous 100 years or even longer. But the character of society has changed so much since the 1948 Act was framed, and with it the nature of the board of directors, that we should take note of some of the pressures exerted on the boards, particularly in the largest companies, and on their professional advisers.
It is more common now than it was 40 years ago for the dominant role on the board to be taken by the heads of


department who have risen through the business to the point where they are invited to become directors, rather than those other directors whose primary concern is to consider the efficiency of the company from the point of view of the investor or even the consumer, the work force or the public at large.
The change that has been taking place has been called the managerial revolution. Whatever name we give it, I believe that most observers would agree that the supervisory role of the board has diminished and that the majority of directors of public companies are now primarily concerned with interests based on their functions as top executives within their departments.
Another change has taken place, although the extent to which it has gone on is currently open to dispute. That concerns the nature of the owners of company shares. The institutional investors now control more than half the equity of our public quoted companies. The proportion is growing and is probably considerably more than 50 per cent. These investors are sophisticated professional people, and the board is often unable to provide the type of expertise in the analysis of its own affairs that professional investment studies require.
That situation puts pressure on the auditors. It tends to take them further in their study of client companies than their strict responsibilities under the present state of the law, but it does not give them the formal status or the agreed guidelines that would assist their operations. The situation is often an unhappy one in very large companies, where the auditors may well feel that they have no formal line of communication to the board on matters that are of great and sometimes urgent significance for top management.
There are also other problems of communication of data and advice which I shall not try to discuss further at this point, except to say that the non-executive directors of large companies are often in need of professional support, which they frequently do not receive.
My proposals are not new. They are, of course, derived from Canadian and particularly from American practice. Clearly, they have been drawn up on the advice of experts in the field, but they also owe something to my own experience of some 20 years in industry and industrial consultancy before I came to the House.
New clauses 14 and 15 are intended to be taken together and are largely a reprint of my Bill of 1977. At that time there was considerable discussion of the practice of the audit committee because it was decided, under pressure from the Securities and Exchange Commission, that the New York Stock Exchange should make it a requirement for any company seeking to be quoted there that it should appoint an audit committee.
I believe that this is a timely opportunity to raise the matter again because such a high proportion of American companies now appoint audit committees to the board and the practice, although still new, is generally regarded in the United States as a useful innovation. It is not just companies on the New York Stock Exchange or other stock exchanges where it has been made a listing requirement to appoint such audit committees that have adopted the practice. Many other companies, particularly the large ones, but also the smaller and smallest companies in the United States, feel that this is a useful thing to do and have now adopted it. 

In this country we cannot afford to be too smug about the performance of the private sector of industry. There are many reasons, of course, why that sector is going through difficulties just now. I am not saying that our managers are by nature second rate and that they fail to compare with the Germans or the Japanese or the Americans because of some personal characteristics—anything but. My own experience of industry and consultancy convinces me that there is noting intrinsically wrong with British management or with the type of people who rise to positions of responsibility on boards of directors. We are, however, plainly failing to organise those people in a way that enables them to function to their best capacity. If we sometimes do not operate as effectively as companies in the same line of business in other countries, we must be ready to ask ourselves why and to see whether we can learn something from the way in which other countries organise their affairs in the private sector of business.
My proposals are devised to apply only to a small number of very large public companies. I have suggested that they should catch companies with a turnover of more than £200 million per year or with a balance sheet of more than £400 million or employing 50,000 or more employees. I suggest that in the first instance the proposals should be confined to that small number of very large companies because, since the etiquette of the performance of audit committee functions is not yet well understood, I think that large companies, which are most likely to do it well if they institute the practice—as, indeed, they are doing in some cases—should set an example from which smaller concerns may learn and, I hope, fruitfully copy.
The proposal is that such companies as are caught by the Bill should consider the appointment of an audit committee at each annual general meeting. That is a modest recommendation. Some have considered it so modest as to be almost unsuitable to be included in legislation. However, although the requirement would not be obligatory except to perform the small function of including an item on the agenda at the annual general meeting—namely, the consideration of the appointment of an audit committee—it need not be merely a useless formality. Indeed, it ought not to be if the institutional investors are doing their bit.
My particular recommendation for this formula is that it would ensure that any shareholder who sought to raise the matter at an annual general meeting would be in order in doing so. He could not be dismissed by the platform on the ground that his recommendation was out of order. Secondly, the members of the board would always have to be sure in preparing themselves for the annual general meeting—particularly the chairman—that they were ready to make a statement of their view about the possibility of appointing an audit committee. If I could achieve that, I would achieve my purpose for the immediate present.
The aim of new clause 15, which is a highly detailed recommendation, is to provide a kind of table "A" that companies can refer to if it is decided to set up an audit committee and they are seeking guidelines as to what constitutes accepted good common practice. However, even there I am not suggesting that it should be obligatory for companies to do precisely what I recommend. In individual cases companies would adapt the procedure in ways perfectly suitable for the circumstances that they have to meet.
The functions of the audit committee could well include all the items on a list that I have derived from the Staff


report on corporate accountability of 4 September 1980, which I was given by extremely courteous advisers in the Securities and Exchange Commission whom I visited two or three weeks ago in Washington in preparation for this debate. It listed as functions for the audit committee the selection of independent auditors, the review of the plan of the audit, of the results of the audit, of the internal controls of the company and of interim financial information, press releases, special investigations, internal audit functions, codes of conduct, providing information to the board—which I would myself wish most to emphasise—and proposed legislation. The report is a detailed one and if my right hon. and hon. Friends in the Department have not studied it they should do so. I should be happy to lend them my copy. 
I quote only one paragraph at this stage which makes an excellent point:
The existence of audit committees in a significant majority of publicly held companies has caused several commentators to speculate that companies without such committees will have some explaining to do to shareholders, investors (especially institutional investors), fellow executives and directors, as well as to the courts.
One comment on the audit committee quoted in the report is also apposite:
directors of public companies should ask themselves the question, 'If you can establish an audit committee and you don't what are you going to use for an excuse?' It is easy to foresee the problem of a board that has not established an audit committee (or exercised such functions) in defending itself if the company suffers a loss because of inadequate internal accounting controls.
Unfortunately, in this country there are all too many cases of companies suffering losses. One suspects that part of the reason is inadequate internal accounting controls. I recommend my right hon. and hon. Friends to consider seriously the advantages of encouraging the adoption of the practice of appointing audit committees at a much faster pace than at present.
11.15 pm
The Government may not agree that this is a matter for legislation and would prefer a suitable term to be included in the Stock Exchange listing agreement. But this matter has been under discussion now for several years, and not enough, in my opinion, is being done. I hope that I have served a useful purpose by drawing attention to it once again and getting my specific proposals back into print.

Mr. Eyre: All hon. Members will, I am sure, agree when I say that we are indebted to the tireless efforts of my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who has tabled a number of suggestions, some of them new, designed to promote the wider spread of non-executive directors and of audit committees. I shall outline why I do not think that the business community needs or is now ready to accept his proposals on audit committees and why I cannot recommend their acceptance to the House. I wish to make it clear, however, that I pay tribute to my hon. Friend for ensuring that these important issues are kept before the House and therefore brought to the attention of business leaders and the wider investing public and, indeed, for playing a crucial part in the public debate that has taken place on them in recent years.
The increasing acceptance of the view that the boards of public companies should contain a substantial proportion of independent non-executive directors is in no small measure due to the persistence and influential advocacy of my hon. Friend. I should like first to deal with

the proposals on audit committees. My hon. Friend expressed deep concern that our performance in large industrial and commercial companies should match that of German and other foreign competitors. I agree with his philosophy and aims in that respect. Similar proposals on audit committees were discussed in detail during the Committee stage of the Bill that became the Companies Act 1980. I do not, therefore, propose to go into the technical details inherent in them.
I would, however, stress that although my hon. Friend suggested an interesting constitution and set of functions for an audit committee, the evolution of the audit committee is in its early stages in the United Kingdom. There is no agreement among business men or professional bodies on the purpose of such a committee and on the way in which a statutory provision would detract from the responsibility of the board of directors as a whole with regard to the management of the company.
Many companies have sub-committees of the board which, in effect, carry out the functions that my hon. Friend suggests should be executed by audit committees. The Government's general view is that it is right to leave companies to develop the organisational forms that they find best suited to achieve commercial success, but I remember the point made by my hon. Friend about comparative success. He referred to his visit to the United States and to the document that he received setting out the functions of the audit committee as seen there. I ask my hon. Friend whether he will be kind enough to lend my Department a copy of the document. We would like to study it. I should like to see it myself.
I understand the emphasis that my hon. Friend places on the need for a quicker pace in advancing the development of audit committees. I shall be interested to examine the document that he will kindly make available.
I welcome experimentation in companies. I have referred to the development of sub-committees with a similar purpose and I see no reason to place difficulties in the path of such useful and valuable experimentation, which is what I fear would happen if there were a requirement that companies should consider adopting an audit committee on the lines specified in the new clause.
I ask my hon. Friend to consider withdrawing his proposals, but I should like to say a few words about the consultation with a wide range of interested parties that the Department conducted during the summer on my hon. Friend's proposals on the circulation of a statement on the eligibility of candidates for a directorship and on the requirement that a general meeting should give consideration to the appointment of non-executive directors at any general meeting at which the election of a director is to take place.
I hope that my hon.. Friend found the results of the consultation illuminating and encouraging, because there was some degree of support for the ideas underlying these proposals. But, quite apart from the considerable technical problems, there was little support for recourse to legislation because there was little evidence of any abuse that required to be put right and that, if further stimulus were required, voluntary codes of practice would be more appropriate.
I should, however, add that recent surveys have shown that most large companies have non-executive directors and that the proportion has been growing in recent years—a fact not unassociated with the praiseworthy pertinacity with which my hon. Friend has pursued this


cause. Although I cannot stray too far from the clauses before the House, I am sure that my hon. Friend will be pleased to hear that discussions have taken place among a group of leading institutions, including the Bank of England, in order to establish an agency to promote and facilitate the election of non-executive directors by companies that have not hitherto appointed non-executive directors to their boards. An announcement about the details will be made later this autumn.
My hon. Friend probably has a long way to go on audit committees in his missionary zeal to develop a better acceptance of his view of their importance, but there is no doubt that there has been considerable progress on non-executive directors. His efforts have played a considerable part in that, and the process is continuing in a way that I think he will welcome.
I express my gratitude to my hon. Friend for putting the proposals forward and giving the House a further opportunity to consider these important issues.

Mr. Clinton Davis: I think that the Minister has been to the supermarket to buy a vast quantity of soft soap. I do not believe that he can have satisfied his hon. Friend the Member for Kensington (Sir B. Rhys Williams) with his bland reply to the important points that the hon. Gentleman raised.
We had from the Under-Secretary a regurgitation of the same reply as we have received every time that the argument has been raised by the hon. Member for Kensington, with some support from me. It is extremely disappointing.
We were told in our previous debate on the subject that most companies behaved benignly, that legislation was to be opposed, and that if we relied on the voluntary approach everything would come right. Now we have the new consultation that has taken place—with precisely the same results as were announced before. We were told that there were technical problems. We were told before that there was little support for recourse to legislation. All that the hon. Member for Kensington is seeking is a perfectly reasonable proposal, to be advanced at every annual general meeting of a major public company as defined in his new clause. Whether the exact definition is right is by the way. We are now discussing the principle.
What can possibly be wrong with leaving the matter for determination by the annual general meeting? The Minister conceded the whole case. He said that the general view was that it was best to leave companies to develop the organisational forms that they deem best suited to delivering commercial success. Well, here is the opportunity. It is best left to the annual general meeting to determine the matter. If the matter does not appear on the agenda, it is never likely to get off the ground. In my view, the hon. Member for Kensington is right in arguing the case again and again, but it is a pity that he does not derive rather more positive support than has been evinced by the Minister tonight.
That was not quite the response that I gave the hon. Gentleman when I dealt with these matters. I took the view that his arguments were extremely persuasive. Of course one must consult, and of course one must try to arrive at a consensus on these matters, but I am not satisfied with the Minister's bland assertion that spectacular progress has been made over the past few years because of the hon.

Gentleman's diligent efforts, speaking occasionally at half-past eleven at night or at some other unpleasant hour, and that it is this that has caused a dramatic change in our corporate affairs. Life is not like that. I am second to none in my admiration of the hon. Gentleman's dedication to this cause and the way in which he has put it before successive Committees dealing with company legislation, but I do not believe that even he would claim that this superhuman effort could be achieved by him alone, or by managing to electrify company directors all over the country into the belief that, reading his words in Hansard—which I am sure all of them do—or in some other esoteric magazine, somehow the situation will be changed. As I said, life is not like that. However, that does not mean that I am urging the hon. Gentleman to give up. One day he may persuade a Minister at the Department of Trade to do something about it.
In my view, this is a modest but desirable new clause, at least in principle. I am not in a position to determine whether the exact wording of new clause 15 is wholly appropriate. However, I wish that the Minister had said "There is a case for this. I shall do it, perhaps not in this Bill—we are not having a Bill next year—but in the next Bill. I really want to do something along these lines." Instead, the Minister has said the same old thing—"Leave it to companies to determine the matter voluntarily, and everything will turn out all right." I regret that that is not so.
When the Minister says that a growing proportion of companies are applying the principles of the audit committees, it is just an assertion. It is not backed up by fact. I only wish that it were true, and that most companies were dealing with matters along the lines suggested by the hon. Member for Kensington. I give him my support, for what it is worth at 11.30 at night, but I am saddened by the fact that the Department of Trade does not seem to be advancing along that route nearly quickly enough.

Sir Brandon Rhys Williams: With the leave of the House, may I say that naturally I proposed the clauses in the hope that the Government would accept them? I think that the formula that I have adopted is so moderate that even the people who are instinctively against further legislation on board practice and the functions of the auditors, and so on, would say that this was a useful innovation which might do good in many cases and would do harm in none.
I am reminded of a famous quotation from Bryce:
But while they talked the heavens darkened, and the flood came and destroyed them all.
I am afraid that while we are talking about the possibility of introducing audit committees in many of our large companies they will go bankrupt, or the whole social scene will change so much that the issue will die on its feet. Although I have had the assurances of Ministers and experts—Establishment figures particularly—that everything is going along quite all right and that there is no need for legislation, I do not think that there is any evidence that we are making significant progress in this area.
So, although I shall not press the House to divide on these clauses now, in view of what my hon. Friend said—and I appreciate the approach that he has adopted, because he intends to commend what I am recommending to management and would like to see progress on these lines—I am not satisfied that we are making sufficient


progress simply by voluntary effort. Some stronger form of encouragement, if not compulsion, is needed, and I shall return to the matter again.
Question put and negatived.

New Clause 32

MINIMUM NOTICE OF MEETING FOR VOLUNTARY WINDING UP

(1) 'For section 293(1) of the 1948 Act (obligation of company to call meeting of creditors for the day, or the day next following the day, of the company's meeting for voluntary winding up), there shall be substituted the following subsection—

(1) "Notwithstanding any power of the members, or of any particular majority of the members, to exclude or waive any other requirement of this Act or the company's articles with respect to the period of notice to be given of any meeting of the company, the company shall give at least seven days' notice of the meeting of the company at which the resolution for voluntary winding up is to be proposed; and the company shall in addition—

cause a meeting of the creditors of the company to be summoned for the day, or the day next following the day, on which the said meeting of the company is to be held; and
cause the notices of the said meeting of the creditors to be sent by post to the creditors simultaneously with the sending of the notices of the said meeting of the company."

(2) The following subsection shall be added at the end of that section—

(7) "Failure to give notice of the meeting of the company mentioned in subsection (1) above as required by that subsection shall not affect the validity of any resolution passed or other thing done at that meeting which would be valid apart from that subsection".'.—[Mr. Clinton Davis.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 33

PROHIBITION ON DIRECTORS OF INSOLVENT COMPANIES FROM ACTING AS LIQUIDATORS, ETC.

'(1) In subsection (1) of section 9 of the Insolvency Act 1976 (power of court to disqualify persons from acting as directors, etc.) for the words from "the court may" to the end there shall be substituted the words—

"the court may make an order that that person shall not, without the leave of the court—

be a director of or in any way, whether directly of indirectly, be concerned or take part in the promotion, formation or management of a company;orote>
be a liquidator of a company; or
be a receiver or manager of the property of a company;
for such period as may, subject to subsection (1A) below, be specified in the order.
(1A) The period which may be specified in any order under subsection (1) above shall begin with the date of the order and may not exceed five years if none of the conduct to which the court has regard under subsection (1) (b) occurred after the day appointed or the coming into force of section (Prohibition on directors of insolvent companies from acting as liquidators, etc.) of the Companies Act 1981, or fifteen years in any other case.".

(2) In subsection (7) of that section, for the definition of "company" there shall be substituted the following definition—

"'company' includes any company which may be wound up under Part IX of the Companies Act 1948;".

(3) The following subsection shall be inserted in that section after subsection (7)—

"(7A) An order under subsection (1) may be made on grounds which are or include matters other than criminal convictions notwithstanding that the person in respect of whom the order is to be made may be criminally liable in respect of those matters.".'.—[Mr. Clinton Davis.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 40

DISCLOSURE OF INFORMATION CONCERNING CONTRACTS OF EMPLOYMENT OF DIRECTORS

'The following provisions shall cease to have effect:

section 56(6)(b) of the 1980 Act (Substantial contracts etc. with directors and others to be disclosed in accounts):
Section 26(3A) of the 1967 Act (directiors' service contracts or memorandum thereof to be open to inspection by company's members); and
(c) Section 61(3) of the 1980 Act (extension of section 26 of the 1967 Act) insofar as it relates to subsection (3A) of section 26 of the 1967 Act.'.—[Mr. Geoffrey Robinson.]

Brought up, and read the First time.

Mr. Geoffrey Robinson: I beg to move, That the clause be read a Second time.
The House will want me to be brief on this clause, and I shall be. I do not expect any change of attitude from the Under-Secretary who, I imagine, will reply to the debate. We feel as strongly about the matter now as we did in Committee, but we shall not want to press it to a Division.
I am disappointed that both the Minister and the officials at the Department have not seen fit to change their minds or even to modify their views on this matter. It has been raised in the other place. It is an issue about which many of us, on both sides of the House, in differing ways, have been greatly concerned over a period of time.
We have put to the Government three points that are specific, restricted and clearly defined. It seems to me in logic that if we are in favour of openness as opposed to secrecy, and we keep returning to these two irreconcilable and incompatible concepts that thave permeated our debates, the Under-Secretary has no argument to put to us.
Let me take the first point yet again. It has been put to the Government in the other place on two separate occasions. It was put by my hon. Friends and myself to the Government in Committee upstairs.
The Government can resist paragraph (a) only if they explain why a contract involving six years' service as opposed to six years of services is so much less significant that it does not have to be included in the company's accounts. I do not see any problem of limitation in the sense that there is an arbitrary limit. We are talking about services as opposed to service and a duration of time.
There was no argument from the Minister in Committee and none from the Government in another place. We are left with an unsatisfactory situation which no doubt will go through on the nod at this late hour.
I said in Committee that there was no one to equal the Minister for recitation. On Report we have had regurgitation. There is no one to beat him for playing a straight bat—except, perhaps, we have to remember that Boycott is still there to give him some competition. All of that, mixed measures and all, does not make up for bad briefs and bad decisions.
Let us consider yet again the question of a director who is to be reappointed and whose main functions are abroad.


Why should not his remuneration be published? What is there to hide? The fact that we refuse to make the information available will give rise to the sort of suspicion that will prompt investigative and other journalists to make inquiries. Paragraphs (b) and (c) are closely interrelated.
The only argument that the Minister has given is the one that he falls back on time and again—that it might be prejudicial. Have the Government ever thought that it might be beneficial to take a risk and to say that people have to declare? I said that at one time I had been a financial controller when such matters had been declared to people with direct executive responsibility but when those people were not directors of the company.
It is futile to continue to press this point tonight. We shall not press the matter to a Division, but I hope that on this occasion at least the Minister, if he does not have something new to say, will refrain from any further recitation or regurgitation. We do not want a repetition of that. Unless he has something new and positive to say, I hope that he will be brief. These are serious matters, though we may treat them with a certain degree of levity at this time of night.
Directors' contracts are things that should be public, and they are things that rightly belong to shareholders. This is of direct interest to shareholders, not just employees and the nation generally. Shareholders have a direct financial involvement that is of crucial importance. We look for something other than the repetition of threadbare arguments.

Mr. Eyre: I shall try to be brief, because I have such a disappointing reply to give to the hon. Member for Coventry, North-West (Mr. Robinson). I recognise that the subject matter of this new clause must be one to which Labour Members attach considerable importance, since an amendment on identical lines was tabled in Committee. I clearly recall the debate on 9 July with the hon. Member. A similar clause was also tabled in another place.
Leaving out a great deal of the next part of my brief, I say that in our view there are good reasons for retaining the two types of disclosure. It is quite normal to expect an executive director to have a contract of service, for example, to determine his emoluments, while it is also reasonable to preserve the details of a director's remuneration from the unjustified inquisitiveness of others. The scrutiny provided for in section 26 of the 1967 Act and the availability for inspection by shareholders of copies of the relevant contracts in our view successfully reconcile these two inevitably somewhat conflicting objectives.
A contract for services with the company in which the director has a material interest, for example, to provide consultancy services, is, however, more uncommon, and such a contract could point to a conflict of interest in a way that a contract of service would not. Such contracts for services should therefore be disclosed in as open a manner as possible—for example, in the accounts, as section 54 of the 1980 Act provided—so that all those dealing with the company can be aware of any possible irregularities.
New clause 40 would, on the other hand, involve widespread duplication of disclosures. Contracts of service would be disclosed in the accounts, while copies would have to be kept for the inspection of shareholders. This would involve companies in an unnecessary

duplication of effort and therefore useless expenditure, and would expand the notes to the accounts with a large amount of information concerning directors' conditions of employment, etcetera, which the shareholders can already find out by inspection at the registered office.
We conclude that to impose this extra burden on companies would serve no useful purpose. The exemption from disclosures, under section 26 of the 1967 Act, of overseas contracts of service has also been criticised on the ground that shareholders should have the right to examine such contracts in the same way as they can examine contracts of service for work in this country. After careful study, and taking into account the difficulties that might be created by full disclosure of overseas contracts, we consider that political or commercial embarrasment, not only for the companies concerned but for the Government—this balance was hallowed in the 1967 Act—could arise if such full disclosures were required for entirely conventional means of providing for a director's employment.
I apologise to the hon. Member for Coventry, North-West for having bored him stiff. However, I have had to repeat the reasons for the decision. They are sound, although I realise that they are unacceptable to the hon. Gentleman.
Question put and negatived.
Further consideration of the Bill, as amended, adjourned.—[Mr. Budgen.]
Bill to be further considered tomorrow.

Property Services Agency

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Budgen.]

Mr. Kenneth Marks: My main purpose in raising this debate is to obtain information about the Government's intentions with regard to the Property Services Agency and to call attention to some of the bad decisions already made, without adequate costing of the options.
In the last Labour Government I had some responsibility for the PSA and I am aware of the difficulties involved in the post to which the Minister has recently been appointed. I realise that he may not be in a position to reply to every point that I raise tonight, but I trust that he will write to me on the more detailed matters. I hope, too, that both he and the Secretary of State will keep the House informed of major changes and of the likely costs or savings. The House is entitled to know—indeed, its Select Committees will demand to know—whether changes are justified.
The Property Services Agency was set up by the Conservative Government in 1972 and replaced the former Ministry, which was best known to the public as the Ministry of Works, and the defence departments for building and maintenance. Its task is to provide, furnish and maintain accommodation required for Government purposes—defence establishments such as airfields, barracks and factories, Home Office requirements in prisons, courts and some special hospitals and the requirements of all Government Departments, except the health services—research laboratories, factories, training centers and innumerable offices in the Government service.


The PSA also does work for the Post Office and Telecom, and it is responsible for the diplomatic estate overseas. It has provided technical co-operation to foreign Governments and it is responsible for constructional work and some maintenance at United States bases in this country. One of its present undertakings is the construction of the Inter-Governmental Maritime Consultative Organisation building near Lambeth bridge.
The PSA does not itself carry out new building work. Most new buildings are planned and designed by it and put out to contract. About one-third of design work is put out to consultants. I remind the House, however, that the ministerial head and the accounting officer are responsible to Parliament, and in the words of a former PSA chief executive 
It is necessary to exercise a greater measure of control over consultants than it is in the private sector.
The PSA is also responsible for a vast amount of rented office accommodation and for the purchase and disposal of land and property, particularly that which is no longer required by the Ministry of Defence.
The PSA also has an advisory role in relation to the Department of the Environment and other Government Departments, and to the construction industry generally. It had a chief executive—and a board—until the death of Sir Robert Cox several months ago. Why is it taking so long to appoint a new chief executive? I know of no other Government Department where that has happened. Are the Government seeking to appoint an industrialist at two or three times the salary of Sir Robert Cox?
In addition to the PSA board, I understand that the Secretary of State has appointed an advisory board consisting entirely of people from industry. What has that board said about privatisation and the service in general?
Are the various other reports that are available to the Secretary of State available to the House? New decisions on the privatisation of the PSA are being taken without adequate consideration of costings and public accountability. I shall give an example. The Government propose to reverse the present proportions of design work carried out by the PSA and that put out to consultants. In 1979 the proportion of part 1 projects—that is, projects over £100,000—was PSA 63 per cent. and consultants 37 per cent. I understand that the proportion is now to be the other way round. Does the research justify that, or is it an act of political dogma?
The Prime Minister, speaking about privatisation, said that decisions
should be commensurate with sound management and good value for money for the taxpayer."—[Official Report, 13 May 1980; Vol. 984, c. 1052–53.]
Does the Minister believe that to be so in the decisions made so far? Do the surveys bear that out? Does the evidence from the professional and technical office cost accounting package bear that out? Does the controlled experiment in the Midland region in the 1970s bear it out?
I understand that a joint Treasury, Civil Service and industry group is examining the matter. Has it given its opinions?
There is evidence that private consultants often choose standards of finishes and quality of materials unnecessarily higher than would have been chosen by PSA design teams. Project cost targets are often exceeded when consultants are used. Will the Minister look again at this major change and ask himself whether the Prime Minister's criteria are being observed? Since the advent of this Government the

whole construction industry has suffered badly. But is it necessary to destroy the public design sector in order to bolster the consultants in the private sector?
I deal next with the question of manpower. The so-called planned reduction of the Civil Service is for the PSA unplanned, precipitate and unfair. The strength of the non-industrial staff is already below the April 1982 target. One must question whether it is adequate to carry out the planning and supervisory duties—supervision of consultants and contractors. Despite the rundown that has taken place, professional and technical staff have had their agreements broken in respect of retirement ages. Forced retirements will probably take place in April 1982. If that happens there will be a shortage of well-qualified staff that may hinder the efficient operation of the agency and the necessary checks to ensure that money is being spent wisely.
The Minister may argue that if the 60-year-olds do not take early retirement there will not be room for youngsters to join the agency for training and subsequent employment. The Minister has no intention of maintaining the intake of youngsters. I reserve my strongest criticism of the Secretary of State for that area. In Liverpool, Blackpool and, no doubt, Croydon, he has spoken of the need for proper training for youngsters. He poses as one of the progressives in the Conservative Party, but the cuts that he has made in his Department and those that he has forced on local authorities give the lie to that.
Four months ago the Manpower Services Commission published "A New Training Initiative". It was sponsored by four Cabinet Ministers and urged an improvement in vocational education. The appeal from the Cabinet Ministers argued that progress depended on positive steps being taken by individual employers. Their appeal has fallen on the deaf ears of the Secretary of State. New craft apprenticeships in PSA were more than 200 in 1979. That figure was reduced to 179 in 1980 and to 58 in 1981. O-level technical apprenticeship recruitment in 1979–80 was 249, in 1980–81 it was 50, and this year it will be 21. Presumably, next year it will disappear altogether.
When I was at the Department I took a particular interest in the training schemes. The PSA has a high reputation in that area. Not all its trained people stay with it, but in an industry that is far from perfect in its training system the Department showed that it recognised that there was a Government function for all Government Departments and that the Government had a responsibility for education and training. I understand that the Secretary of State feels that education and training are not his job but belong to private enterprise or the MSC. What guarantee is there that private enterprise will provide the alternative training? I suggest that the record of industry does not lend itself to the belief that it will do so. Youth opportunities programme schemes are no alternative to the adequate training given by the PSA.
On 11 September the then Under-Secretary wrote to me about the reduction in training and apprenticeships. He said that the lower intakes reflected the agency's reduced requirements for design staff and the need to look in future primarily for management and maintenance of the estate. Will the Minister privatise the estate management and maintenance areas also? Have there been any experiments in that area? If so, what are the results? What monitoring is being carried out by the Department?
The PSA professional and technical staff especially fear that what has happened to apprentice and student


recruitment is a foretaste of what may happen to the PSA generally and that the Government eventually intend to destroy the professional and technical disciplines within the PSA. Certainly, if it is to be given the job of only passing on contracts to consultants, the Department will not keep good, qualified people. I urge the Minister to think again. The PSA and its predecessor Ministries were not established by Left-wing Socialist Governments. Previous Governments have recognised the need for a strong public body for Government and defence works. I urge the Minister to fight the unwarranted cutback in the PSA, especially the destruction of its training programmes.

Mr. Doug Hoyle: I cannot add much to the case that has been so ably presented by my hon. Friend the Member for Manchester, Gorton (Mr. Marks). However, I support my hon. Friend's contention that the Government's case cannot be justified by a lack of efficiency on the part of the agency. Indeed, it is highly efficient. The Minister should not follow a doctrine of cuts purely to satisfy the supporters of his party. There should be more reasoning than that. The Minister should not follow mere dogma. Of course, the Government have promised their supporters that they will make cuts in the Civil Service.
I have a special interest in the cuts that are being made in Warrington, which have been recommended in the United Kingdom territorial organisation report. The report called for a 10 per cent. cut in the Property Services Agency. That cut has already been achieved. Why are the cuts taking place twice over? They are not necessary.
The other day I received a letter of 9 October from the Secretary of State for the Environment. He referred to his special interest in the problems of Merseyside. He said that he would be setting up a task force in Liverpool to help him in his work. As he made clear in his letter, it will cover a wider geographical area than the Merseyside metropolitan county. It will cover the whole of the Merseyside special development area. Even more important from my point of view is the fact that it will cover Warrington, Runcorn and Skelmersdale new town.
Why add to the problems of the area, including those of Warrington, by going ahead with the cuts? The clients in the area are well satisfied with the services that are provided. My hon. Friend referred to that in some detail. The agency is efficient and effective. Why go ahead and damage the structure of the service? The only reason for doing so is to satisfy the claims of the backwoodsmen that the Government must carry out their policy. There can be no justification for taking such a course. I hope that the Minister will announce that after considering all the facts and the strong case presented by my hon. Friend the Government have decided that they will not go ahead with their plan.

The Under-Secretary of State for the Environment (Sir George Young): I am very grateful to the hon. Member for Manchester, Gorton (Mr. Marks) for giving the House the opportunity to discuss the future of the Property Services Agency. I had hoped that my transfer from the DHSS would mean that I should not spend quite

so much time on Adjournment debates. If the way in which I have started after the Summer Recess is any guidance, my hopes will be cruelly disappointed.
The hon. Member for Gorton was the Minister responsible for the PSA during the last years of the previous Labour Administration. I remember seeing him on a constituency case. He greeted me with patience and courtesy. He took a close interest in the welfare of the agency and its staff. But it is clear from his remarks that there is a misunderstanding towards the PSA. I hope that in the time available to me I shall be able to give him and his hon. Friend the Member for Warrington (Mr. Hoyle) some reassurance.
A year ago my right hon. Friend the Secretary of State for the Environment made his views about the PSA clear in an address that he gave to senior staff. If the hon. Gentleman will bear with me, I shall quote from my right hon. Friend's address. It will help to clear up some of the doubts and misunderstandings that he has expressed.
My right hon. Friend said:
The PSA has an important role in the management of the Government estate—indeed, a vital role in support of the Armed Forces and serving the operational needs of Government.
The question is not whether the work needs to be done but how it is done and by whom.
I want to see PSA enlisting the resources of the private sector across the whole range of its work—and working with the private sector so as to stimulate it and improve its performance. There is immense scope here for a positive and constructive approach.
I want to see PSA as a thoroughly professional and efficient organisation, managing the Government's vast portfolio, managing the Government's building programme and acting as a strong influence for good on the quality of the environment and on the construction industry. This does mean change—in attitudes, responsibilities and working methods. But it also means that I see a strong positive role for PSA.
Undoubtedly, far more of the work will actually be carried out in the private sector but the tasks of managing the Government estate and supporting our defence capability will remain huge and essential.
In the light of those undertakings, what the hon. Member for Gorton said about destroying professional and technical expertise does not stand up. That is not our intention for the PSA. The assurances given by the Secretary of State are proof of that.
The Government are the largest property owners in the country and have the largest building programme. We currently have about 700 major new projects in construction and a further 1,360 in planning. The district works offices place nearly 2 million job orders for maintenance and minor works each year, and there are about 17,000 land transactions annually, including acquisitions, leases, rent reviews and disposals. The PSA provides these services to civil departments throughout the United Kingdom and Northern Ireland, to British forces at home and abroad and to the Diplomatic Service worldwide.
The hon. Member asked me about the chief executive. I agree that it is now urgent to find a successor to Sir Robert Cox. I have had discussions with senior officials in the short time that I have been at the Department, and I am satisfied that measures are now being taken to secure a replacement in the near future.
The hon. Member also asked about the advisory board. Last December, my right hon. Friend invited Mr. Nigel Mobbs, chairman of the Charterhouse Group and Slough Estates, to chair the PSA advisory board. The board provides a range of advice to Ministers and to the agency


on PSA operations. Among the aims that we hope the advisory board will help us achieve is to ensure that the PSA deserves and receives due credit for what it does.
The hon. Member devoted much of his speech to privatisation or contracting out. As he knows from his time in office, the PSA has traditionally looked to the private sector to carry out much of its work. All major new construction and the bulk of its maintenance work is undertaken by private sector contractors. A proportion of its varying load of design work has always been put to private sector consultants and currently stands at 37 per cent. Some of the PSA's work is particularly suitable for contracting out and it is our policy that the agency should put an increasing proportion of its design work to consultants and its maintenance work to contractors. But this is not simply an exercise in reducing the number of civil servants.
We see the agency using its patronage positively to support the construction industry, improve its performance, and equip it to compete more effectively in world markets.
The speed at which this transfer to the private sector can take place is naturally limited by the rate of wastage in the PSA staff numbers and by the size of client Departments' future programmes.
The policy of contracting out design work is, as I have explained, based primarily on the broad benefits to be achieved by greater interchange between the public and private sectors. We are, of course, concerned to ensure that the transfer of work to consultants gives value for money and achieves good results.
The hon. Member mentioned staff reductions. One of the main purposes of the mergers that led to the creation of the agency in 1972 was to maximise efficiency and produce economies of scale. Nine years ago the PSA had about 47,000 staff. When this Government took office that figure had been reduced to 39,000, and it now stands at about 33,000. So the policy of staff reduction or cuts, as the hon. Member for Warrington phrased it, was carried out by the previous Administration, and the figure fell from April 1974, when it stood at 42,916, to 38,575 in April 1979. By 1984 we expect staff numbers to have been reduced still further, to just over 28,000. These reductions have been achieved almost entirely by natural wastage and have been facilitated by the contracting out to the private sector of work formerly done by civil servants.
These are undoubtedly major savings, and I pay tribute to the way in which the agency has contributed to the reduction in civil servants' numbers to which the Government are committed. The range of clients served by the PSA and the services they demand are unchanged. The fact that the PSA continues to provide an effective service to its clients in this period of rapid readjustment reflects great credit on the staff. I am also encouraged by the readiness of the PSA to accept new responsibilities and to adapt to the new working methods that these changes have entailed.
With regard to student intake, the PSA's student recruitment policy has over a number of years been geared to securing a supply of trained professional and technical staff to meet its projected needs for staff in the design and maintenance fields. The student intakes have provided the prime source of the PSA's recruits in several design disciplines and have ensured that the agency has made a very full contribution to training effort related to its requirements for staff. 

At present there are about 450 full-time students employed by the PSA in the architectural, engineering, surveying and technical disciplines who are undergoing training of up to three years prior to becoming qualified. The PSA also provides a number of opportunities for sandwich course and vacation students to gain practical experience while undertaking a college course. In addition, the PSA sponsors some of its best technicians for courses leading to professional qualifications.
The demand for professional and technical staff has declined over the past two years because of the need for the PSA to contribute to the reductions in the size of the Civil Service, and in particular because of the decision to place a much larger proportion of new design work with consultants. This latter development has particularly affected requirements for design staffs, and the PSA's intake of students in the design disciplines has been reduced to fit the future pattern of demand for staff and to avoid training people who cannot subsequently be employed in the public sector in a permanent job.
This year the agency recruited 15 graduates in the surveying and engineering disciplines and 21 O-level student draughtsmen. The hon. Member produced other figures for student intake. Perhaps I may be allowed to write to him about them, as they do not tally exactly with the figures that the Department has given me.
The requirements for future years are under consideration in the light of a detailed analysis of our staffing requirements, and representations from the trade union side will be fully considered before we take any final decisions, as will the remarks of the two hon. Members this evening.
The PSA has been carrying out a review of its future need for craft appprentices and for aprentice training, but the results of that review are not yet available.
I am aware of the concern about the measures that we are taking to lower the retirement age for certain members of staff over 60. These measures are necessary to deal with surplus numbers in certain disciplines and to correct the serious imbalances that have arisen recently, but the measures are being applied flexibly to avoid hardship.
We are now considering the report of a study of the PSA regional organisation. That report recommends a number of changes in the structure and the staffing of the PSA's regional and area offices. Some of the more modest changes have already taken place. This is naturally of great concern to the staff, and we have given the trade unions the fullest opportunity to consult their members on the results of the study. The consultation process has now been completed and my right hon. Friend will have the benefit of the considered views of the trade unions before he reaches any decisions.
I hope that I have been able to assure the hon. Members on the broad role of the PSA, although I understand their reservations about the reductions in the numbers directly employed by the PSA.
Both hon. Members raised a number of more detailed points, and perhaps I could generously accept the offer to deal with them in correspondence.
I conclude by saying how very impressed I have been, in the short time that I have been at the Department, by the quality of work of the PSA and the very high standard of staff that I have come across. I look forward eagerly to working with them over the next few years and bringing


to fruition some of the very important projects that the PSA is now undertaking on behalf of the Government and other public bodies.

Question put and agreed to.

Adjourned accordingly at nine minutes past Twelve o'clock.